In the matter of Jewel of India Holdings Pty Ltd - [2022] NSWSC 356

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Jewel of India Holdings Pty Ltd [2022] NSWSC 356
Hearing dates: 15 and 16 March 2022
Date of orders: 30 March 2022
Decision date: 30 March 2022
Jurisdiction: Equity - Corporations List
Before: Williams J
Decision:
Application to set aside summonses issued under Corporations Act 2001 (Cth), s 596A dismissed. Application to set aside orders for production issued under Civil Procedure Act 2005 (NSW), s 68 adjourned for directions as to a further hearing.

Catchwords:
CORPORATIONS – application to set aside examination summonses and orders for production – summonses issued under Corporations Act 2001 (Cth), s 596A to former administrators and liquidators of company in liquidation on the application of former director and shareholder and claimed creditor of the company to whom eligible applicant status had been granted – where applicants’ stated purpose of the examinations is to investigate potential claims against former administrators and liquidators in relation to (a) the sale of the company’s business and (b) their failure to investigate potential claims of the company against its secured lender – whether stated purpose genuinely held – whether examination summonses issued for the predominant purpose of former director attempting to secure commercial leverage against liquidators in relation to claims foreshadowed by the liquidators against the former director – where liquidators unfunded – whether examinations and orders for production unjustifiably oppressive.

Legislation Cited:
Corporations Act 2001 (Cth), ss 596A, 597B

Cases Cited:
Bradshaw v McEwans Pty Ltd (1954) 217 ALR 1
Re Equiticorp Finance Ltd; Ex parte Brock (No. 2) (1992) 27 NSWLR 391
Re Godfrey (as liquidator of Pobje Agencies Pty Ltd) (2007) 61 ACSR 54; [2007] NSWSC 138
Kimberley Diamonds Limited v Arnautovic (2017) 252 FCR 244; [2017] FCAFC 91
New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610
Re Newheadspace Pty Ltd (in liq) (2020) 144 ACSR 224; [2020] NSWSC 173
Re Normans Wines Ltd (receivers and managers appointed) (in liq) (2004) 88 SASR 541; [2004] SASC 171
Re Southland Coal Pty Ltd (recs and mngrs apptd) (in liq) (2006) 58 ACSR 113; [2006] NSWSC 184
Re Total Entity Pty Ltd (in liq) (2003) 47 ACSR 577; [2003] NSWSC 924
Walton v ACN 004 410 833 Ltd (formerly Arrium Ltd) (in liq) [2022] HCA 3
Williams v Spautz (1992) 174 CLR 509

Category: Principal judgment
Parties: James Douglas Dampney (First Applicant)
Peter James Gothard (Second Applicant)
Stephen James Parbery (Third Applicant)
Mr Kishore Matta (First Respondent)
Avia Corporate FS Pty Ltd ACN 164 538 354 (Second Respondent)
Representation:
Counsel:
Mr J K Kirk SC and Mr J Hynes (Applicants)
Mr M A Izzo SC and Ms J Shepard (Respondents)
Solicitors:
King & Wood Mallesons (Applicants)
Banton Group (Respondents)

File Number(s): 2021/202957
Publication restriction: N/A

Judgment

Introduction

These reasons for judgment concern an application by the liquidators and former administrators of Jewel of India Holdings Pty Ltd ACN 141 963 813 (in liq) (Jewel Holdings) to set aside examination summonses issued to them pursuant to s 596A of the Corporations Act 2001 (Cth) and orders for production of documents on the grounds of abuse of process.
The summonses were issued and the production orders were made by a Registrar of this Court on the application of Mr Kishore Matta and Avia Corporate FS Pty Ltd (Avia), to whom the Australian Securities and Investments Commission (ASIC) had granted “eligible applicant” status. Mr Matta and Avia are the respondents to the application by the liquidators and former administrators to set aside the examination summonses and orders for production.
For the reasons that follow, the liquidators and former administrators have failed to establish that the examination summonses are an abuse of process and their application to discharge those summonses is to be dismissed. It is not possible to determine at this time whether the orders for production are unjustifiably oppressive so as to constitute an abuse of process. Their application to set aside or impose conditions on those orders is to be adjourned for two weeks when the scope of the work required to comply with the orders and the costs of compliance should be ascertained.

Evidence

Jewel Holdings and the following related companies comprise the Jewel Group:

Jewel Fine Foods Pty Ltd ACN 160 567 528 (in liq);

Jewel of India Enterprises Pty Ltd ACN 081 063 774 (in liq) (JOIE);

Jewel International Foods Pty Ltd as trustee for the Jewel International Food Unit Trust ACN 616 403 886 (in liq) (JIF);

Jewel of India Admin Pty Ltd ACN 141 964 516 (in liq);

Jewel Properties (Aust) Pty Ltd ACN 112 228 663 (in liq) (Jewel Properties);

Jewel Equipment Pty Ltd ACN 141 964 927 (in liq);

Jewel of India Retail Pty Ltd ACN 141 964 865 (in liq); and

Gardeners Nominees Pty Ltd ACN 160 155 608 (in liq).

The Jewel Group was established in 1997 by Mr Matta and his wife, Ms Indrani Matta. The Jewel Group carried on the business of manufacturing ready-made meals.
JOIE and JIF were the main trading entities within the Jewel Group.
Jewel Properties held certain real property on trust for the Matta Family Trust.
At all material times, Mr Matta was a director of each company within the Jewel Group. He remains a director of those companies and owns 50 per cent of the shares in Jewel Holdings.
Commonwealth Bank of Australia (CBA) provided banking and loan facilities to the Jewel Group, which were cross-collateralised across each entity within the Group. Each of the borrowing entities within the Jewel Group – Jewel Holdings, JOIE, JIF and Jewel Properties (in its own right and as trustee for the Matta Family Trust) – provided supporting securities. Various Jewel Group entities, Mr Matta and Ms Indrani Matta also provided guarantees.
In the 2018 and 2019 financial years, the main trading entities within the Jewel Group reported significant losses.
The directors of the Jewel Group sought to implement operational and financial change within the group to improve its financial position, including by attempting to negotiate a restructure and rationalisation of the Jewel Group’s finance facilities with CBA.
By February 2019, the Jewel Group was in financial distress.
Mr Matta attended a meeting with representatives of CBA on about 12 February 2019 at which CBA put forward two options for consideration by the Jewel Group. An email sent by Mr Matta’s solicitor, Mr Cruikshank of Assured Legal Solutions, to CBA’s solicitors, Norton Rose Fulbright Australia (NRF), on 13 February 2019 described the options put forward by CBA as:

using 263 King Street, Mascot as security for CBA to fill the hole in CBA’s security suite (referred to in Mr Cruikshank’s email as “Proposal 1”); and

sale of assets of the Jewel Group to pay $70 million to CBA as part of an overall settlement between Jewel Group and CBA (described as “Proposal 2”).

The property at 263 King Street, Mascot was owned by Balaji and Family Property Pty Limited as custodian for the trustee of the Balaji Superannuation Fund. Mr Cruikshank’s email raised various difficulties or potential difficulties in relation to Proposal 1 under the Superannuation Industry (Supervision) Act 1993 (Cth).
Proposal 2 included a sale of the whole of Jewel’s business for $20 million. Mr Cruikshank’s email stated:

“… the $20m valuation for the business is fanciful – with the best will in the world, Kishore could not achieve this outcome for the Bank anytime soon.
On a current EBITDA of $3.7m, this assumes a circa x6 multiple and minimal transaction costs to implement. The business is significantly distressed (a point the Bank has made consistently since mid last year in conjunction with the withdrawal of its financial support). No sensible purchaser of a business with this EBITDA will purchase a business on this multiple, where the business carries circa $18m in creditors at present (a historical high as trade creditors in effect provided the working capital CBA withdrew last year). A more market multiple [sic] is x1 to x2 at best, prior to significant costs of realisation and before account must be had of the time and risk involved with funding and trading the business from now to any such sale of business outcome.”

That email was sent by Mr Cruikshank on Mr Matta’s instructions. Indeed, Mr Matta forwarded it to his contact at CBA.
In cross-examination, Mr Matta gave a series of answers in which he endeavoured to link his view that a $20 million sale price was fanciful to specific circumstances existing at the time the email was sent. With respect, those answers were not coherent. However, nothing ultimately turns on Mr Matta’s views about the value of the Jewel Group business at a time before the Administrators had commenced the sale process which yielded offers of up to $40 million for the business.
CBA issued default notices on 18 February 2019.
On 26 April 2019, CBA appointed Messrs James Douglas Dampney, Peter James Gothard and Stephen Parbery as joint and several voluntary administrators of each of the nine entities in the Jewel Group pursuant to s 436C of the Corporations Act 2001 (Cth) (the Administrators).
CBA also appointed Mr Jason Tracy and Mr Vaughan Strawbridge of Deloitte Financial Advisory Pty Ltd as the receivers and managers of:

a property at 247 King Street, Mascot and a property in Murarrie, Queensland, both of which were held by Jewel Properties on trust for the Matta Family Trust; and

as agents for the mortgagee in possession of the property at 263 King Street, Mascot that was held by Balaji and Family Property Pty Limited as custodian for the Balaji Superannuation Fund Trustee.

I will refer to Messrs Tracy and Vaughan as the Receivers.
As at the date of appointment of the Administrators and Receivers, the total debt owed by the Jewel Group to CBA was approximately $93 million.
At the time of their appointment, the Administrators were partners of Ferrier Hodgson, which was in the process of merging with KPMG. On 8 May 2019, the Administrators filed a declaration of relevant relationships and/or declaration of indemnities, in which they disclosed that:

KPMG had been engaged by the Jewel Group on 28 February 2018 to provide pre-lend due diligence assistance in connection with the Jewel Group’s application for financial facilities from CBA; and

CBA had agreed to provide funds to fund the administration process, including for the Administrators’ remuneration and expenses.

Mr Dampney has given evidence that CBA provided an overdraft facility of $2 million to the Administrators that was used “on a limited basis to appropriately manage the working capital cycles of the Jewel Group’s business” and was not used to pay any remuneration to the Administrators or Liquidators. The overdraft facility was repaid in full by the Administrators in early May 2020. Neither the Administrators nor the Liquidators have received any other funding from CBA.
The Administrators adopted a business-as-usual trading strategy, while simultaneously seeking to sell the business of the Jewel Group. Separate sale processes were commenced by the Administrators on 3 May 2019, on 15 October 2019 and on 16 December 2019. The final sale process ultimately resulted in the sale of the business to Chef Fresh Pty Ltd for $25.5 million on 18 March 2020. That sale was completed on 1 May 2020.
It is necessary to refer to the sale processes in a little more detail.
During the period from 3 May 2019 until 24 September 2019, the Administrators ran a public sale and marketing campaign seeking expressions of interest for either a recapitalisation of the Jewel Group or for the purchase of the business and assets as a going concern. The Administrators shortlisted 11 bidders out of approximately 50 parties who submitted expressions of interest. Four of those 11 bidders made the final shortlist and the Administrators engaged in “stage 3 due diligence discussions” with those four bidders during the period from 17 June until 11 July 2019.
During the sale process, Mr Cruikshank wrote to the Administrators on behalf of Mr Matta on 21 May 2019 offering to purchase the business assets of the Jewel Group for $10 million and, at the same time, putting forward a proposed deed of company arrangement with a $2 million deed fund for unsecured creditors (excluding CBA and “the Matta family interests”). The business assets to be acquired for the $10 million purchase price included all plant and equipment, inventory, all supply contracts with retailers (including Coles, Aldi, Costco, Metcash, IGA and Woolworths but excluding Kraft Heinz), operational contracts, premises leases, equipment leases and intellectual property rights. It was a condition precedent to completion of the proposed transaction that CBA consent to the transaction, agree to release its security over the assets to be purchased as part of the transaction and commit to vote in favour of the proposed deed of company arrangement. It was a further term of the proposed transaction that there would be “[b]ack to back releases across the Matta Family and [CBA], subject to carve outs preserving [CBA’s] rights as first registered mortgagee of 247 King Street, Mascot, NSW, limited to the agreed amount.”
During March 2019 and April 2019 until the appointment of the Administrators, Mr Matta had been negotiating with CBA to pay $66 million in full and final settlement of the Jewel Group’s liabilities to CBA (which were approximately $93 million). Mr Matta had been negotiating the third party finance required to fund that payment to CBA, and had been keeping CBA apprised of those negotiations. Shortly after Mr Matta learned that CBA had appointed the Administrators on 26 April 2019, Mr Cruikshank wrote to NRF expressing Mr Matta’s disappointment with CBA’s action and urging CBA to accept $66 million and to terminate the appointment of the Administrators.
There is no evidence as to whether Mr Matta made any offer of payment to CBA in consideration for the releases on which his offer to the Administrators was expressed to be conditional.
In cross-examination, Mr Matta said that his offer of 21 May 2019 represented what he could afford to pay at the time rather than an amount that he considered to be a fair value of the Jewel Group business.
On 22 May 2019, Mr Cruikshank wrote to the Administrators’ solicitors, King & Wood Mallesons (KWM), stating:

“Your clients, Messrs Parbery, Gothard and Dampney, are the appointed voluntary administrators of Jewel Properties (Aust) Pty Ltd (Trustee), which, until the time of your client's appointment, was the trustee of the Matta Family Trust (Trust).
Pursuant to clause 13 of the Deed of Settlement of the Trust dated 5 March 2005, the Trustee was ejected from its office as trustee of the Trust on the date of, and by reason of, your client's appointment. Thereafter, the Trustee has continued to act as bare trustee of the Trust only.
Pursuant to clause 15.1 of the Deed of Settlement, our client Mr Matta hereby gives notice to the Trustee that Avia Corporate FS Pty Ltd ACN 164 538 354 (Avia) is appointed as the replacement trustee of the Trust.
As a consequence, Avia now holds the legal title to any choses in action which form part of the property of the Trust, including without limitation any choses in action in relation to claims against the Commonwealth Bank of Australia.”

Returning to the sale process, the Administrators wrote to Mr Cruikshank on 30 June 2019 stating:

“I have been advised by the Group’s secured creditor that Mr Matta has been unable to reach an agreement regarding the secured liabilities owed by the Group and that an agreement is unlikely to be reached in the future.
Based on the non-binding offer submitted by Mr Matta on 21 May 2019 I confirm that this offer is significantly lower than other bids received. As a result, the offer in its current form is not one that can be accepted and therefore Mr Matta will not be admitted to the final stage of the sale process.
Should Mr Matta wish to revise his bid please contact me as a matter of urgency noting that final binding bids are required to be lodged by Friday, 5 July 2019.”

Mr Matta did not submit any revised bid.
The four shortlisted bidders were required to submit their best and final offers by 11 July 2019. The Administrators received two final bids by that deadline: an offer from B&J City Kitchen Pty Ltd (BJCK) for $35 million and an offer from BE Campell Pty Ltd (BEC) for $28.5 million. The Administrators determined to accept BJCK’s offer and entered into an exclusivity period with BJCK until 24 July 2019. Upon being notified of the Administrators’ decision, BEC submitted a further unsolicited offer of $42 million, representing a 45 per cent increase on its 11 July 2019 bid.
On 18 July 2019, the Australian Competition and Consumer Commission (ACCC) notified the Administrators that it intended to commence a public review of BJCK’s proposed acquisition of the Jewel Group’s business.
During the ACCC review and the exclusivity period with BJCK, the Administrators were undertaking further negotiations with BJCK. By leveraging BEC’s increased offer, the Administrators negotiated with BJCK to increase its bid to $40 million.
On 24 July 2019, the Administrators executed a sale agreement with BJCK. The agreement included a requirement for BJCK to pay a break fee of $2 million in the event that ACCC clearance for the sale was not obtained within 10 weeks of the sale agreement. In his affidavit affirmed on 23 August 2021, Mr Dampney deposed that:

“The Administrators determined that it was appropriate to continue to prefer the BJCK bid rather than jeopardise that bid by seeking to pursue the BE Campbell proposal. This course was taken for a number of reasons, including that:
a)   BE Campbell’s offer was made on an unsolicited basis after the expiry of the competitive bid process deadline;
b)   the Administrators had not had the ability to engage with BE Campbell regarding this bid due to being in a period of exclusivity;
c)   the bid may have no longer been open or available at the headline value expressed;
d)   it was not possible to explore discussions with BE Campbell without the preferred bidder withdrawing their offer;
e)   in the absence of any competitive tension, BE Campbell’s offer was likely to reduce significantly;
f)   significant uncertainty existed with regard to the terms of the Sale and Purchase Agreement (SPA) which would need to be negotiated with BE Campbell;
g)   the business would need to be traded for a further period while terms were being negotiated with attendant commercial risk and funding requirement, and
h)   there was a reasonable likelihood that the conditions to any such bid may be similar to those of the SPA with BJCK (including the ACCC condition).”

On 5 September 2019, the ACCC announced that it had decided to oppose BJCK’s proposed acquisition of the Jewel Group on the basis that BJCK and the Jewel Group were the two largest manufacturers of chilled ready meals in Australia and the proposed acquisition was likely to substantially lessen competition for the supply of chilled ready meals.
The ACCC’s public announcement noted that BJCK had not sought clearance from the ACCC for the acquisition. The announcement quoted the Chairman of the ACCC as saying:

“It is critical that company executives understand that attempting to sell businesses or assets to a competitor, particularly a close competitor, is likely to attract the attention of the ACCC”.
“Administrators also have a responsibility to ensure that a potential buyer notifies the ACCC at the earliest opportunity in these circumstances.”

As a result of the ACCC announcement, the Administrators terminated the sale agreement with BJCK on 24 September 2019. BJCK paid the Administrators $2.225 million on 26 September 2019, comprising the break fee and a contribution towards the Administrators’ legal costs of the ACCC review, plus GST. That concluded the first sale process.

The Administrators conducted the second sale process for the Jewel Group business during the period from 15 October 2019 to 12 December 2019. The Administrators engaged with parties who previously expressed an interest in acquiring the business, including BEC, and received approximately 30 expressions of interest which materialised into eight bids, four of which were shortlisted and progressed to further due diligence. According to Mr Dampney’s evidence, all shortlisted bidders advised the Administrators that their offers were conditional on reaching agreement for ongoing supply to the Jewel Group’s major customer, Coles Group Limited (Coles). The second sale process culminated in only one final bid of approximately $17.9 million. Mr Dampney describes that bid as being “heavily discounted” because the bidder had been unable to reach an agreement with Coles. Notwithstanding the heavy discount, the bid was conditional on the bidder reaching a commercial agreement with Coles on terms acceptable to the bidder.
Shortly after the 12 December 2019 deadline for final offers under the second sale process, Coles wrote to the Administrators advising that it had been unable to agree on key terms for a supply agreement with any of the shortlisted bidders for the Jewel Group business, but that Coles was interested in acquiring the business itself. Mr Dampney has given evidence that, in light of this development, “the Administrators were forced to conclude that the second sale process had failed to procure a suitable binding offer”.
Concurrently with, but independently of, the Administrators’ second sale process, the Receivers sold the 247 King Street property and the Murarrie property in October and November 2019. The proceeds of sale were applied to reduce the amount owed by the Jewel Group to CBA. Jewel Properties, in its capacity as trustee of the Matta Family Trust, had guaranteed Jewel Holdings’ debt to CBA and mortgaged those two properties to CBA in order to secure its obligations as guarantor. As I have already mentioned, Avia replaced Jewel Properties as trustee of the Matta Family Trust in May 2019. Avia claims to be a subrogated creditor of Jewel Holdings in the amount of up to approximately $38.4 million, being the amount of Jewel Holdings’ debt to CBA that Avia contends was discharged out of the proceeds of sale of those properties.
Mr Dampney has given evidence describing the third sale process for the Jewel Group business as an informal sale process that commenced on about 16 December 2019 and concluded on 18 March 2020, when a binding agreement was executed with Chef Fresh Pty Ltd (a wholly owned subsidiary of Coles). According to Mr Dampney, the consideration received was $25.5 million, which included the assumption of up to $1 million in employee entitlements and allowed the return of approximately $2.6 million worth of bank guarantees.
The sale of the Jewel Group’s business and assets to Chef Fresh Pty Ltd was completed on 1 May 2020.
On 14 May 2020, the Administrators issued their report to creditors tabling the findings of their preliminary investigations and their opinion concerning the options available to creditors in deciding the future of the Jewel Group at the second meeting of creditors.
The report set out the consolidated assets and liabilities of the Jewel Group as disclosed in the directors’ report on company affairs and property (ROCAP). On the basis of the ROCAP, the Jewel Group had, as at the date of the Administrators’ appointment, net assets of approximately $14.6 million, including plant and equipment that the directors had estimated had a value of $58.6 million, and liabilities of approximately $88 million owed to CBA.
After referring to the completion of the sale of the Jewel Group’s business and assets on 1 May 2020, the report stated that the funds received from the sale would be applied to pay down the debt owed to CBA as the secured lender but would be inadequate to discharge that debt. Accordingly, any return to priority creditors and unsecured creditors would be entirely dependent on any amounts that may be recovered by a liquidator in relation to voidable transactions or claims against directors.
The report stated that the Administrators’ preliminary investigations indicated that the Jewel Group was likely insolvent from at least 18 February 2019, being the date on which CBA issued default notices to the Jewel Group. The report also stated that the directors had not provided the Administrators with any reasons as to why they believe the Jewel Group became insolvent. The report contained a general discussion concerning potential directors’ liability for insolvent trading.
The report also stated that the Administrators’ preliminary investigations had identified a number of potential unfair preference transactions, uncommercial transactions and unreasonable director-related transactions that required further detailed investigation, which would be undertaken by liquidators, if appointed. The potential unreasonable director-related transactions included a shareholder loan of approximately $1.5 million made by JOIE, drawings paid by two other entities within the Jewel Group to Mr Matta totalling almost $6 million and drawings by one entity within the Jewel Group to Balaji and Family Property Pty Limited.
Other matters identified in the report as being for investigation by liquidators, if appointed, included convertible notes totalling approximately $7.5 million that appeared to relate to a US company connected to the brother of one of the Jewel Group directors, the transfer of inventory from the Jewel Group to a restaurant and café business owned by the directors, and the transfer of a business previously owned by the Jewel Group to another entity related to the directors of the Jewel Group prior to the appointment of the Administrators. KWM had written to Mr Cruikshank in relation to some of those matters on 3 March 2020. Mr Cruikshank’s response dated 11 March 2020 had denied any wrongdoing on the part of Mr Matta.
Mr Matta received the Administrators’ report dated 14 May 2022, but had “just glanced through it” and did not go into any of the detail in the report at that time.
The second meeting of creditors was held on 25 May 2020. The minutes record that one creditor enquired about the offers received from the sale process and the Chairperson of the meeting (Mr Dampney) advised that he was unable to provide details due to confidentiality. The creditors resolved pursuant to s 439C(c) of the Corporations Act that the Jewel Group be wound up and that Messrs Dampney and Gothard be appointed liquidators. Mr Parbery had ceased his role as administrator on 15 May 2020.
On 10 July 2020, KWM wrote to Mr Cruikshank stating that the Liquidators were progressing their investigations into the conduct of the directors of the Jewel Group and various transactions that had occurred in the lead up to the failure of the Jewel Group.
The letter raised five matters.
First, the letter stated that the Liquidators’ investigations into the directors’ loan accounts within the Jewel Group had resulted in preliminary findings that:

there were total loan balances of $8.176 million owing by Mr Matta and Ms Indrani Matta to various entities within the Jewel Group as at the date of appointment of the Administrators; and

there were other significant transactions totalling over $70 million that appeared to be personal transactions recorded as liabilities of other entities in the Jewel Group.

The letter demanded payment of $8.176 million and sought an explanation in respect of the other transactions referred to above.
Second, the letter sought an explanation of three loans totalling $7.48 million recorded in the records of the Jewel Group as having been made by Jewel Properties in 2015 and 2016. The letter stated that the loans, which were described in the Jewel Group records as convertible notes, had been made to foreign companies connected to the brother of Ms Indrani Matta. The letter sought further information about the loans and convertible notes, including an explanation of the rationale for the loans and how they benefitted the Jewel Group.
Third, the letter sought an explanation for the delivery of stock of the Jewel Group to the value of approximately $915,000 that had been delivered to restaurants operated by Jewel Restaurants Pty Ltd (an entity outside the Jewel Group) for no consideration.
Fourth, the letter sought an explanation for Jewel Properties making payments to the ATO as part of a payment plan for Ms Monica Matta’s liability (as a beneficiary of the Matta Family Trust) for capital gains tax incurred on the 2017 sale of a property in Gardners Road. The property had been owned by Jewel Properties as trustee for the Matta Family Trust.
Fifth, the letter advised that the Liquidators’ preliminary investigations indicated that the Jewel Group was likely insolvent from at least 24 October 2018 and possibly from 14 September 2018. The letter contended that Mr Matta and Ms Indrani Matta had continued to trade the business of the Jewel Group, incurring significant liabilities, notwithstanding that it would have been readily apparent to them that the Group was insolvent. The letter invited Mr Matta to explain what (if any) defences he may intend to raise in response to an insolvent trading claim and provide any supporting documents.
The letter concluded by indicating the Liquidators’ intention to conduct public examinations of Mr Matta and Ms Indrani Matta if they did not cooperate by providing the information and answers sought. The letter requested payment of the $8.176 million by 24 July 2020 and responses to the questions and requests for information in the letter by 31 July 2020.
On 20 July 2020, Mr Cruikshank sent an email to KWM advising that he had received the letter and provided it to Mr Matta. In cross-examination, Mr Matta confirmed that he did receive KWM’s letter from Mr Cruikshank, that he had read it very carefully at the time and discussed it with Mr Cruikshank, and that he understood that the Administrators were demanding that he pay significant amounts of money and raising a series of questions about other transactions and were seeking an explanation from him about a number of things. The Administrators’ demand for payment was for an amount that Mr Matta accepted was a substantial amount of money and that it would have exhausted all of his assets at the time to pay that amount. Nevertheless, Mr Matta gave evidence that he was unconcerned, or only concerned “to some degree” by the Administrators’ letter because he did not have access to the documents that he would have wished to review in order to consider whether the Administrators’ demands and claims had merit or substance.
On 19 August 2020, KWM sent an email to Mr Cruikshank noting Mr Matta’s failure to respond to the 10 July 2020 letter and making a final request to provide the information sought in that letter by close of business on 26 August 2020.
On 27 August 2020, Mr Cruikshank sent an email to KWM stating:

“We have taken our clients' instructions on the matters raised in your letter. Our clients will take the opportunity to engage with your clients and explain their position on the issues raised.
However, to do that, our clients have needed input from EY and other third parties on various points, including the detailed transaction listing that you have provided, and all in circumstances where Kishore Matta (who has the primary information on these topics) does not have access to his former emails and many books and records.
Nevertheless, we are preparing a detailed response to the matters set out in your letter, and will provide it to you as soon as it is complete. We expected to have it to you by early next week.”

Mr Matta confirmed in cross-examination that Mr Cruikshank’s email of 27 August 2020 had been sent to KWM on his instructions.
In the meantime, the Liquidators had issued a report to creditors on 24 August 2020. The report recorded that:

following the sale of the business and assets of the Jewel Group to Chef Fresh Pty Ltd, there were no further assets to be realised other than the collection of some minor debts;

$15 million had been paid to CBA in respect of its registered security interests and the secured creditor had lodged an amended proof of debt in the amount of $41,003,554;

unsecured creditors of Jewel Group entities had submitted proofs of debt totalling $55,198,354;

the Liquidators’ investigations had identified potential unfair preference payments, uncommercial transactions, unreasonable director-related transactions and insolvent transactions;

the Liquidators’ investigations regarding insolvent trading were ongoing and they had not yet determined whether there was any commercial merit in pursuing an insolvent trading claim; and

any return to creditors would be entirely dependent on future recoveries in respect of the potential unfair preference payments, uncommercial transactions, unreasonable director-related transactions and insolvent transactions referred to above.

The report did not provide creditors with any information about the offers received for the Jewel Group business during the sale process.
Mr Matta gave evidence that he does not recall reading the Liquidators’ report.
Contrary to Mr Cruikshank’s email to KWM on 27 August 2020, no response was ever made on behalf of Mr Matta to KWM’s letter of 10 July 2020. In cross-examination, Mr Matta said that he made no response because he did not have access to records that would have been relevant to test the Liquidators’ claims. Mr Matta said: “I had literally no correspondence, no communication, no- any notes, no – no access to my files, so – emails or anything. I mean, how am I supposed to respond? How am I supposed to get answer? How am I supposed to say if this – that this is not correct?”. There was no challenge to Mr Matta’s evidence that he lacked access to files, emails and other documents.
Mr Dampney has given evidence that the Liquidators’ investigations into the affairs of the Jewel Group are continuing.
Mr Dampney has also given evidence that, as things presently stand, the Liquidators have not taken steps to prosecute the potential claims against Mr Matta and Ms Indrani Matta and related family entities “due to a current lack of funding”. However, the Liquidators are “continuing to explore funding options so that these claims may be pursued.”
At some time between 27 August 2020 and 20 November 2020, Mr Matta engaged Banton Group to act as his solicitors in relation to the administration and liquidation of the Jewel Group. In cross-examination, Mr Matta avoided answering several questions about his reasons for changing solicitors and eventually said that there was no reason for the change. The notion that Mr Matta changed solicitors for no reason, at a time when he was facing the Liquidators’ demand that he pay an amount of money that would exhaust all of his assets and also facing potential other claims by the Liquidators, is inherently implausible and I reject that evidence.
Banton Group wrote to ASIC on 20 November 2020 applying for “eligible applicant” status for Mr Matta and Avia for the purpose of conducting examinations of the Liquidators concerning:

“2.1   the Administrators’ apparent failure to undertake appropriate steps in the sale of the business of Jewel Fine Foods, including Jewel Holdings;
2.2   the apparent sale, at undervalue, of the business; and
2.3   the Liquidators’ apparent failure to investigate and prosecute potential claims against [CBA],
with a view to determining whether any further steps or proceedings ought to be taken against the Administrators or Liquidators, including for compensation for the benefit of Jewel Holdings, Jewel Fine Foods, their contributories and creditors.”

Banton Group’s letter described the first two subjects proposed for examination as the “Sale Process Claim”. The letter stated:

“39.    Our clients consider that the Administrators failed to conduct the management of the sale of the Jewel Fine Food’s business in accordance with what ought be expected of an administrator acting reasonably and prudently in their position. This concern arises in the following circumstances:
39.1    during the first sale process, the Administrators only proceeded with a single offer from B&J City Kitchen to the ACCC in circumstances where:
(a)    they knew or should have known that the sale was likely to be rejected by the ACCC because it well known that B&J City Kitchen was Jewel Fine Foods largest competitor in the chilled ready meals market;
(b)    B&J City Kitchen had not sought approval from the ACCC prior to entering an exclusivity agreement and sale agreement with the Administrators;
(c)    there were several competitive offers, including an offer from BE Campbell for equal or similar value as the offer from B&J City Kitchen and which was not subject to the same competition issues as B&J City Kitchen;

39.2 following the rejection of the B&J City Kitchen sale by the ACCC, the Administrators failed to proceed with BE Campbell’s offer, which was still on foot and had already been provided clearance by the ACCC; and
39.3 due to the lapse in time and loss of competitive tension between the first and second sale process, customers left the business, there were months of extra costs by the Administrators, and the price the Administrator ultimately sold the business for was significantly less than could have otherwise have been obtained (for example, the Administrators had an initial offer from BE Campbell for between $30-42 million which was $5.5-17.5 million more than what was ultimately obtained).”

It is plain from the letter that, by 20 November 2020, Mr Matta knew the range of prices that had been offered by BEC. In cross-examination, he could not identify precisely when or how he came to know this.
In relation to the Liquidators’ apparent failure to investigate potential claims against CBA, Banton Group’s letter stated:

“42.    First, our clients consider that the Jewel Fine Foods (including Jewel Holdings) may have claims against CBA for unconscionable conduct or promissory estoppel by CBA:
42.1    Breaching the Additional Funding Promise, which resulted in the use of Payable Financing and ultimately lead to the loss of business from General Mills. The loss of the Exclusivity Agreement reduced the value of the Jewel Fine Foods business (in which each of the entities comprising Jewel Fine Foods had an interest), which ultimately contributed to it being sold for by the Administrators for substantially less than its previous value.
42.2    Failing to provide financing pursuant to the CGT Promise, or to agree to an alternative funding arrangement in conjunction with the King St Offers, which caused or contributed to the inability of the Borrowing Entities to obtain alternative financing for the full amount of the CBA’s debt of that was otherwise acceptable to the CBA. The failure to obtain alternative financing contributed to the appointment of the Administrators and the reduction in the value of the Jewel Fine Foods business.
42.3
   Refusing to accept the King St Offers, which prevented the

reduction of the total CBA debt and ultimately contributed to the inability of the Borrowing Entities to obtain alternative for the full amount of the CBA’s debt of that was otherwise acceptable to the CBA. The failure to obtain alternative financing contributed to the appointment of the Administrators and the reduction in the value of the Jewel Fine Foods business.”

43. On 14 May 2020 the Administrators released a report into their administration of Jewel Fine Foods (Administrators Report). Section 7 of the Administrators Report sets out the Administrators’ preliminary investigations into potential claims that might be pursued on behalf of the group. However, it does not mention any investigations undertaken into claims against the CBA. A copy of the Administrators Report is provided at Attachment.

44. On 24 August 2020, the Liquidators released a report in the liquidation of Jewel Fine Foods (Liquidators Report). Section 3 of the Liquidators Report comprises an update on the Liquidators’ investigations into potential claims that might be pursued on behalf of the group. However, it does not mention any investigations undertaken into claims against the CBA. A copy of the Liquidators Report is provided at Attachment Q.”

The matters allegedly giving rise to the three potential claims against CBA had been described earlier in Banton Group’s letter.
The alleged breach of the “Additional Funding Promise” referred to in paragraph 42.1 of Banton Group’s letter relates to an alleged breach by CBA of a promise made in February 2018 to provide additional funding of $5 million to support the launch of new product lines by Jewel Group. Mr Matta alleges that Jewel Group proceeded with the new product lines in order to meet its contractual obligations, but the CBA failed to provide the promised funding despite Jewel Group complying with CBA’s “ongoing pre-lend requirements”. Jewel Group was required to fund the product launches from cash flow that had been set aside to pay its suppliers, resulting in loss of supplier confidence, reduced supply terms and other detriment to Jewel Group.
The “CGT Promise” referred to in paragraph 42.2 of Banton Group’s letter was an alleged promise by CBA to provide funding to facilitate payment of a capital gains tax liability of approximately $11 million in respect of a property known as the Gardeners Road property in consideration for Jewel Properties selling a property at Green Street in Banksmeadow and remitting the whole of the sale proceeds to CBA. Mr Matta alleges that, as a result of CBA’s breach of that promise, the CGT liability remained outstanding and this contributed to Jewel Group’s inability to restructure its CBA facilities on reasonable terms with an alternative funder.
The matters referred to in paragraph 42.3 of Banton Group’s letter relate to attempts by the Jewel Group to sell the property at 247 King St, Mascot in June 2018 in order to raise money to repay part of the debt owed by the Jewel Group to CBA. Mr Matta alleges the selling agent elicited offers for the property that were put to CBA together with various proposals for restructuring Jewel Group’s CBA facilities. Mr Matta alleges that CBA declined all offers put to it, thereby preventing the sale of 247 King St and the restructure of Jewel Group’s facilities on reasonable terms with an alternative financier.
In subsequent correspondence with ASIC on 10 March 2021, Banton Group stated that the claims against CBA, if successful, would have decreased Jewel Holdings’ debt and thereby decreased Mr Matta’s liability to CBA pursuant to his personal guarantee referred to at [9] above. I infer that this is a reference to the potential for the Liquidators to have admitted CBA’s proof of debt for a reduced amount, applying s 553C of the Corporations Act. As referred to at [109] below, the amount owing to CBA without any set off is presently $26 million and Mr Matta is personally liable for the whole of that sum as guarantor.
Mr Matta gave evidence in cross-examination that he had not informed the Administrators or Liquidators about any of those potential claims that he thought may exist against CBA at any time before Banton Group wrote to ASIC on 20 November 2020. Mr Matta said that he did not think it was his responsibility to advise the Administrators or Liquidators. He considered that it was their responsibility to review the files and documents available to them and consider and investigate potential claims against CBA in the same way they did in relation to potential claims against him.
ASIC granted “eligible applicant” status to Mr Matta and Avia on 27 May 2021.
Mr Matta and Avia applied to this Court on 15 July 2021 for summonses to be issued to Messrs Gothard, Dampney and Parbery pursuant to s 596A of the Corporations Act requiring them to attend Court to be examined about the examinable affairs of Jewel Holdings and to produce documents.
It appears that the Liquidators became aware of Mr Matta’s application for the issue of examination summonses. On 29 July 2021, KWM sent an email to Banton Group requesting confirmation of (inter alia):

“the claims which it is asserted may be available to the liquidators and/or the Jewel Group against CBA (we observe that your clients never previously raised any related concerns with the liquidators and have instead commenced the current proceedings without any notice)”

Banton Group replied on 6 August 2021 that the application for examination summonses was being made on an ex parte basis, the Liquidators had no right to question Mr Matta about the application and Banton Group did not consider it appropriate to provide any response to the substantive matters that KWM had raised.
On 19 August 2021, the examination summonses were issued and orders for production of documents were made pursuant to s 68 of the Civil Procedure Act 2005 (NSW).
By interlocutory process filed on 23 August 2021, Messrs Gothard, Dampney and Parbery applied to set aside the examination summonses and orders for production. It is not in dispute that the application was made within the three day period prescribed by rule 11.5 of the Supreme Court (Corporations) Rules 1999 (NSW).
Where referring to steps taken by Messrs Gothard, Dampney and Parbery in their former capacity as administrators of Jewel Holdings and/or Jewel Group, I will refer to them as the Administrators. Where referring to steps taken by Messrs Gothard and Dampney in their capacity as liquidators of Jewel Holdings and/or Jewel Group, I will refer to them as the Liquidators. Where referring to the role of Messrs Gothard, Dampney and Parbery in their application to set aside the examination summonses and production orders, I will refer to them as the Applicants. I will refer to Mr Matta and Avia as the Respondents.
KWM are the solicitors for the Applicants and Banton Group are the solicitors for the Respondents.
Mr Dampney has given evidence that he is not aware of any basis for Mr Matta or Avia to assert that the Administrators failed to undertake appropriate steps in the sale of the Jewel Group business or that they sold the business at an undervalue. Mr Dampney contends that the terms of the sale to Chef Fresh Pty Ltd compare favourably with the terms of Mr Matta’s offer made on 21 May 2019 and with the $20 million price that Mr Matta had described as “fanciful” in February 2019.
Mr Dampney has given evidence that neither CBA (being the secured creditor who stood to receive the net proceeds of sale of the Jewel Group business) nor any other creditor made any complaint at the time of the sale process concerning the conduct of the sale process or the sale price achieved. Moreover, the Administrators and Liquidators received no such complaint from Mr Matta or Avia prior to the commencement of these proceedings with their application for the issue of examination summonses.
There was also evidence that the Liquidators requested Mr Matta and Avia to produce various categories of documents, including any documents created between May 2019 and November 2020 recording or referring to any concerns held, complaints or allegations made by any of the Respondents to the Administrators or Liquidators regarding the sale process for the Jewel Group business undertaken by the Administrators. Mr Matta and Avia replied that there were no such documents to produce.
Mr Dampney contends that:

“If the plaintiffs had genuine concerns in relation to the sale process or sale price, I would have expected the plaintiffs to have written to the Administrators either during the circa 12 month sale process, or in the 12 months since the business was sold to Chef Fresh.”

Mr Matta said in cross-examination that he did not know the prices that the Administrators were negotiating with potential purchasers of the Jewel Group business during the sale process. This aspect of his evidence was not challenged and there is no evidence that Mr Matta was given any information during the sale process other than in the Administrators’ letter dated 30 June 2019 referred to at [33] above that Mr Matta’s offer for the business was “significantly lower than other bids received”. As referred to at [54] above, the Administrators declined to disclose information about the offers received for the business at the second creditors’ meeting on 25 May 2020 on the grounds of confidentiality. Whilst Mr Matta was aware of the range of offers made by BEC by 20 November 2020, there is no evidence as to when he became aware of those offers as referred to at [77] above.
Mr Dampney has given evidence that the investigations undertaken by the Administrators and Liquidators did not identify any claims against CBA available to the Administrators or Liquidators or the Jewel Group. Mr Dampney is unaware of any correspondence from the plaintiffs or any other party identifying any such potential claims.
In paragraph 47 of his affidavit affirmed on 23 August 2021, Mr Dampney deposed that:

“If the plaintiffs had written to the Administrators or Liquidators identifying concerns with CBA’s conduct and claims which may be available to the Liquidators or the Jewel Group, I would have investigated those claims and sought associated legal advice from my solicitors, King & Wood Mallesons.”

In paragraph 64 of his affidavit affirmed on 23 August 2021, Mr Dampney contended:

“… my view is that the plaintiffs have commenced the current proceeding not because of legitimate concerns with regards the sale process or genuine concerns that actual or potential claims against CBA have not been properly investigated for the benefit of Jewel Group, its creditors, or its members. Rather, in my view, the current proceeding has been commenced by the plaintiffs in an attempt to create a ‘bargaining chip’ for the purposes of assisting the plaintiffs to resolve Mr Matta’s personal liability to the CBA and the Liquidators and/or in an effort to bring pressure to bear on the Liquidators and CBA to abandon those claims. Mr Gothard and Mr Parbery have informed me that they share this view.”

In response to paragraph 64 of Mr Dampney’s affidavit, Mr Matta gave the following evidence in his affidavit sworn on 15 September 2021:

“I deny this allegation made by Mr Dampney. My sole purpose in making the Examinations Application is to investigate potential claims that Jewel of India Holdings Pty Ltd (In Liquidation) (Jewel Holdings) might have against the Examinees for (i) their failure to undertake appropriate steps in the sale of the Jewel Fine Foods business and/or (ii) their failure to investigate and prosecute potential claims against the CBA on behalf of Jewel Holdings (and the other entities in the Jewel Fine Foods group of companies).”

In cross-examination, Mr Matta was unable to identify the time when he first formed the view that the Administrators may have sold the Jewel Group business at an undervalue.
In his affidavit sworn on 15 September 2021, Mr Matta deposed that, at all times, he has considered the Jewel Group business to be “worth considerably more than the $24 million obtained by the Liquidators”. Mr Matta referred to:

a valuation of $56.6 million as at 13 November 2018 for the leasehold improvements, plant, machinery and equipment at the Jewel Group’s manufacturing facility in situ and on a continuing use basis;

preliminary proposals for finance solicited by Mr Matta in November 2018 based on enterprise valuations in the range of $100 million to $179 million; and

an offer of refinance that Mr Matta received from Varde Partners Inc on 26 April 2019 for $74 million. The offer was subject to several conditions precedent including provision of the most recent audited financial statements of the borrower, the guarantors and each security provider, the financier’s satisfactory due diligence review of each of those entities and persons, and valuations.

Mr Matta gave inconsistent evidence in cross-examination about whether the figures that he put on the value of the Jewel Group’s business included the value of properties held on trust for the Matta Family Trustee or the Balaji Superannuation Fund.
Mr Matta gave the following evidence of his state of mind at the time that he and Avia applied for the issue of examination summonses:

“a.    In late May 2020, I had a number of conversations with creditors of Jewel Fine Foods, including Jeshinta Widjaja of Eastern Cross Trading Co, Robert Lo of Pros Bros Providore, Endy Dharma of Adams Poultry and Helem Lim of New Kanye Foods who had attended the second meeting of creditors held by the Examinees on 25 May 2020 (Second Creditors Meeting).
b.   I was aware from these conversations that several creditors had raised concerns about the sale of the Business at the Second Creditors Meeting and that Mr Dampney (who chaired the meeting) had dismissed these concerns without substantively responding to them.
c.   I did not consider that I would obtain any better response from the Examinees by raising the same matters with them informally. Accordingly, I considered that it was appropriate that I take a more formal approach to investigating my concerns.”

It was put to Mr Matta in cross-examination that he could not have known what response would be forthcoming from the Administrators unless and until he raised his concerns about the sale process with them, which he did not do except by applying for the examination summonses. Mr Matta answered that he had found the Administrators unhelpful and unresponsive to his requests for documents that he required to meet claims that various creditors of the Jewel Group were making against him personally.
It was also put to Mr Matta that he has never had any concern about the sale process adopted by the Administrators. Mr Matta denied this and maintained that he did hold concerns.
It was put to Mr Matta that, from at least the end of August 2020, he had been highly concerned about the claims that the Liquidators had foreshadowed against him and had applied for the examination summonses so as to seek to stall and frustrate the Liquidators from bringing those claims against him by causing them trouble and expense and in an attempt to obtain a “bargaining chip” with the Liquidators regarding the potential claims against him. It was put to Mr Matta that he had given false evidence in his affidavit when he described his sole purpose as being to investigate potential claims against the Liquidators for their alleged failure to take appropriate steps in the sale of the Jewel Group’s business and/or their alleged failure to investigate potential claims against CBA. Mr Matta denied all of these allegations.
As I have already mentioned, CBA is presently owed approximately $26 million by the Jewel Group and Mr Matta is personally liable for that sum as guarantor.
The Liquidators presently have $9,398.74 cash at bank in respect of the Jewel Group. They have no funding to pursue the potential claims in relation to voidable transactions or insolvent trading. They have no funding for the cost of their time and the legal fees they will incur in attending the examinations and producing documents (if the summonses and orders for production are not set aside).
In his affidavit affirmed on 23 August 2021, Mr Dampney noted that it was unclear how many days would be required for his attendance at the proposed public examinations. He contended that:

“… to the extent that the Liquidators are required to attend extensive examinations, it will adversely impact our ability to continue to progress the Jewel Group’s liquidation and our work on other engagements and incur costs at the Liquidators’ hourly charge out rates of $695 for Mr Gothard and $695 for me.”

The Respondents adduced evidence that they have informed the Registrar that they estimate that they will require one day for the examination of each examinee and, consistently with the Court’s control over the process, the Registrar has questioned why three days will be required.
There was no evidence identifying what (if any) adverse impact it would have on the Liquidators’ ability to continue to progress the Jewel Group’s liquidation (or their work on other engagements, to the extent that this may be a relevant factor) for each of Mr Dampney and Mr Gothard to attend for examination for approximately one day.

Applicable principles

The applicable legal principles were not in dispute. The following summary of those principles draws heavily on the helpful written and oral submissions of both parties.
Subject only to the doctrine of abuse of process, s 596A of the Corporations Act requires the Court to summon current or former officers of a corporation for examination about the corporation’s examinable affairs if an eligible applicant applies for the summons and, in the case of former officers, the Court is satisfied that the proposed examinee held office during an applicable time period specified in s 596A(b). Absent an abuse of process, the Court has no discretion to decline to issue an examination summons if the requirements of s 596A are satisfied: Walton v ACN 004 410 833 Ltd (formerly Arrium Ltd) (in liq) [2022] HCA 3 (Walton) at [91]-[92] (Gageler J), [152] (Edelman and Steward JJ).
The “officers” of the corporation to whom the Court must issue an examination summons if the requirements of s 596A are satisfied include administrators and liquidators of the corporation. Current and former administrators and liquidators are in no different position than any other current or former officer liable to be summoned for examination under s 596A. The legislative scheme specifically envisages that administrators and liquidators may be examined about the corporation’s examinable affairs, which include their acts or omissions in relation to the corporation’s business or property in the course of the external administration: Kimberley Diamonds Limited v Arnautovic (2017) 252 FCR 244; [2017] FCAFC 91 (Kimberley Diamonds) at [27]-[28], [93] and [98].
The requirements that must be satisfied before a summons is issued to an administrator or liquidator under s 596A do not include the availability of funds in the external administration on which the administrator or liquidator may draw for the purpose of paying their remuneration for their time expended in preparing for and attending the examination and paying any legal fees or other costs that they may incur in doing so.
As the parties submitted, there are no finite or closed categories of abuse of process. However, as has been recognised in many previous authorities, including Walton,^[1] abuses of process typically fall into the following three categories, which may overlap:

the use of the court’s processes for an illegitimate purpose;

a use of the court’s processes that is unjustifiably oppressive to one of the parties; and/or

the use of the court’s process in a manner that would bring the administration of justice into disrepute.
1. Walton at [93] (Gageler J) and [130] (Edelman and Steward JJ).

In relation to the first category, the relevant purpose is the predominant purpose of the party invoking the court’s processes. In Walton, Edelman and Steward JJ said (at [134]-[135], citations omitted):

“[134] … the central question … is whether the litigant’s predominant purpose, in the sense of the end to be achieved and the means by which that end will be achieved, is inconsistent with the express or implied scope of the court’s process. The terminology of a litigant’s purpose should therefore be understood to mean both the end which the litigant seeks to achieve and the means by which they will do so.
[135] A better way of expressing the first category of abuse of process is therefore simply to ask whether the predominant means adopted and ends to be achieved by a litigant (in other words, the litigant’s purpose) are inconsistent with the express or implied scope of the legal process. Where the legal process is statutory, if the purpose of the litigant is consistent with the scope of the legislation then it will not usually matter whether the litigant has some ulterior motive. After the identification of the litigant’s predominant means and ends, the question that is ‘implicit in, indeed at the very heart of that process’ is to asked whether the ‘scope and purpose of the statute’ will be contradicted or stultified.”

After undertaking a detailed analysis of the legislative history of s 596A, Edelman and Steward JJ described the purpose of the section in the following terms (at [170]):

“The purpose of s 596A, at a higher level of generality than its terms, and reflecting the underlying mischief to which the provision is directed, is therefore to address, by examinations of present or former corporate officers or provisional liquidators, the administration or enforcement of the law concerning the corporation and its officers in public dealings. A summons for examination will not be an abuse of process unless the predominant purpose of the examination would contradict or stultify – in some way – this public interest in the external administration of a company.”

Their Honours went on to say (at [175]):

“Legitimate purposes under s 596A therefore include the enforcement of the Corporations Act, the promotion of compliance with that Act and the protection or shareholders or creditors from corporate misconduct. An examination conducted for a purpose that included investigating the possible existence of misconduct on the party of a company’s officers might be expected to serve the public interest in ways such as these. Hence, regardless of whatever ultimate purpose a litigant might have, a summons that is sought for a substantial purpose that includes the public purpose of enforcement of the Corporations Act, whether by ASIC or another eligible applicant, is not a summons sought for a purpose foreign to s 596A in the sense that it is inconsistent with the purposes of s 596A. And the purpose of enforcement of the Corporations Act includes examination for the purpose of determining whether relief might be obtained in respect of potential corporate misconduct.”

It is important to bear in mind that an examination is essentially an information gathering process and an applicant for a summons under s 596A need not demonstrate reason to believe that the proposed examinations will be of utility in revealing misconduct by the corporation or its officers or disclosing a viable cause of action available to enforce the law concerning the corporation and its officers: Kimberley Diamonds at [21], [102]-[103], [107]; Walton at [187] (Edelman and Steward JJ). White J (as his Honour then was) expressed the point in the following terms in Re Godfrey (as liquidator of Pobje Agencies Pty Ltd) (2007) 61 ACSR 54; [2007] NSWSC 138 at [76]:^[2]

“It is no part of the court’s task on an application for the issue of an examination summons to discern whether or not the company has a good cause of action against the examinees or a person with whom the examinees are connected. The investigation of facts to ascertain whether or not a cause of action might exist either against such persons, or against other persons, (such as officers of the company), is a proper purpose of an examination. Such an examination is not to be pre-empted by the examinees adducing evidence directed towards demonstrating that they, or persons connected with them, could have no liability to the company.”
2. Subsequently cited with approval in Re Newheadspace Pty Ltd (in liq) (2020) 144 ACSR 224; [2020] NSWSC 173 at [115] (Rees J).

Walton concerned an allegation of abuse of process within the first category referred to above only. By the statement at [170] that an examination summons will not be an abuse of process unless the examination would contradict or stultify the public interest in the external administration of a company, I do not understand Edelman and Steward JJ to have excluded the possibility of an examination summons that was obtained for a legitimate purpose being an abuse of process because it is unjustifiably oppressive to a party and/or would bring the administration of justice into disrepute. However, it seems to me that the public interest in the external administration of a company that underpins the purpose of s 596A has a bearing on the question whether particular circumstances that may be burdensome for an examinee are capable of constituting unjustifiable oppression or bringing the administration of justice into disrepute.
In Kimberley Diamonds, the Full Court of the Federal Court said (at [88]-[94]):

“[88] … it is possible to conceive of a case where an examination of a liquidator pursuant to a s 596A examination summons could be considered to be so burdensome, costly or intrusive to the liquidator, and his or her administration of the winding up of a company, that the summons could rightly be found to constitute an abuse of the Court’s processes. If, for example, the evidence led on an application under r 11.5 of the Corporations Rules revealed that the winding up was in its very late stages, the proposed examination was expected to cover a very wide range of ill-defined topics, last many weeks, and involve considerable private and public expense, the Court might well conclude that the summons significantly intruded on the performance by the liquidator of his or her duties and the administration of the winding up. In those circumstances, the Court might well conclude that the examination would be seriously and unfairly burdensome, prejudicial or damaging, or productive of serious and unjustified trouble and harassment: cf Ridgeway v R [1995] HCA 66; (1995) 184 CLR 19 at 75 (per Gaudron J); cited with approval in Batistatos at [14].
[89] This, however, was not such a case. Mr Arnautovic led no evidence which was capable of supporting a finding that the proposed examination would be significantly burdensome, costly or intrusive to him or his administration of the winding up of KDC. The evidence revealed that KDL had undertaken to limit the examination to a fairly narrow and discreet topic — the sales process of the Ellendale mine. There was nothing to suggest that the examination would be lengthy or would require Mr Arnautovic to be significantly or substantially diverted from his task of administering the winding up. The process could not have been expected to be costly to Mr Arnautovic or KDC because KDL had undertaken to fund the examination at no cost to KDC: Judgment at [36]. In any event, by virtue of s 596F(1) and s 597(5B), the Court would remain in control of the examination, and could limit or end it if it was considered to be taking too long, or to be costing too much. The Court could also order KDL to pay Mr Arnautovic’s costs if it was ultimately found that the examination summons was obtained without reasonable cause: s 597B.
[90] The primary judge’s conclusion that the exercise of the s 596A power in this case involved a substantial intrusion into the liquidation appears to have been based on a presumption or inference that the examination of any liquidator in the course of the conduct of a liquidation would necessarily involve a substantial intrusion into the liquidation. That assumption or presumption appears to have been derived from her Honour’s analysis of the authorities concerning the special position of liquidators, particularly the authorities concerning other statutory powers that permit inquiries into the conduct of liquidators, such as s 536 the Corporations Act.
[91] There are, however, dangers inherent in transposing the general statements in those authorities to the entirely different statutory context of s 596A. That is particularly so given the significant differences between the power to order an inquiry under s 536, and the power to issue an examination summons under s 596A.
[92] The Court’s power to order an inquiry under s 536 into a liquidator’s performance of his or her duties is discretionary. The discretion is only enlivened if it appears to the Court that the liquidator has not faithfully performed or is not faithfully performing his or her duties, or has not observed or is not observing a requirement of the Court or the Corporations Act, or a complaint is made to the Court or ASIC concerning the conduct of the liquidator in connection with the performance of his or her duties. Important also is the fact that, once the discretion is exercised, the Court is given very wide powers. The Court may “take such action as it thinks fit”, which might include making orders that affect the substantive rights of the liquidator. It is perhaps not surprising, in those circumstances, that the authorities suggest that the Court should exercise restraint in ordering such an inquiry lest it unduly interfere in the liquidator’s conduct of the winding up.
[93] In contrast to s 536, the issue of a summons under s 596A is mandatory once the essentially formal criteria are satisfied. It is also tolerably clear that, by virtue of the definitions of ‘officer’ and ‘examinable affairs’, the statutory scheme envisages that a liquidator can be summonsed to be examined about an act or thing done on behalf of the company when the company is being wound up. The statutory scheme for examinations does not treat a liquidator differently to any other officer who might be subject to an examination. Important also is that an examination itself cannot affect or alter the substantive rights of the examinee.
[94] Given these important differences, the authorities concerning s 536 and like provisions do not provide any real support for a presumption or inference that an examination of a liquidator pursuant to a s 596A examination summons would necessarily involve a substantial intrusion into the liquidation, or would otherwise be unfairly burdensome or oppressive, such that it might constitute an abuse of process. Nor was the evidence before the primary judge capable of supporting a finding that the examination of Mr Arnautovic in fact involved a substantial intrusion into the liquidation of KDC such as to constitute the sort of oppression or unfairness which could amount to an abuse of process.”

The Full Court of the Federal Court gave the following example of circumstances that may constitute an abuse of process, illustrating the potential overlap between the first category and the second and third categories of abuse of process referred to at [118] above (at [104]):

“… if the examinee is able to demonstrate that the controversy, or the perceived controversy, or the unanswered questions, do not genuinely relate to or arise from the examinable affairs of the company, or are otherwise speculative, far-fetched or misconceived … it could well be concluded that the examination was an abuse of process. The use of the examination process for such a purpose could rightly be found to be vexatious or oppressive and to bring the administration of justice into disrepute.”

The overlapping nature of the categories is also illustrated by the authorities in which it has been held that the conduct of examinations for the predominant purpose of inflicting costs and inconvenience on the examinees, thereby exerting pressure on them to enter into a settlement or compromise of a claim, is a use of the process for an illegitimate purpose or oppressive: see Re Newheadspace Pty Ltd (in liq) [2020] NSWSC 173; (2020) 144 ACSR 224 (Newheadspace) at [117]-[119] (Rees J) and the authorities there referred to.
The onus of demonstrating that there has been an abuse of process rests on the party alleging it. It is well accepted that this onus is “a heavy one”: Williams v Spautz (1992) 174 CLR 509 at 529 (Mason CJ, Dawson, Toohey and McHugh JJ).
If an abuse of process is established, it would be unusual for the court’s inherent jurisdiction to be exercised by staying the proceedings (or, in the present context, discharging the examination summonses) if the abuse is capable of being adequately addressed by the court in other ways, including by the court’s power to control what questions might be asked during the examinations. It is for those reasons that Edelman and Steward JJ in Walton described the discharge of an examination summons on the grounds of abuse of process as “a measure of ‘last resort’” that is “reserved for only the most exceptional or extreme cases”: Walton at [191], citing Kimberley Diamonds at [33].

Consideration and determination: Examination summonses

The Applicants do not dispute that the criteria for the issue of the examination summonses under s 596A of the Corporations Act were satisfied.
The Applicants do not contend that the proposed subject matters for the examinations identified in the Respondents’ correspondence with ASIC are outside the scope of the examinable affairs of Jewel Holdings.
The Applicants contend that the examination summonses and production orders are an abuse of process because the Court’s power to issue them has been invoked for an illegitimate purpose and the examination summonses and production orders are unjustifiably oppressive. They submit that:

“The processes were issued, it appears, in reaction to Mr Matta being given notice of his liability to repay substantial amounts owing to the companies and a likely insolvent trading claim. The matters upon which the [Respondents] seek to examine have never been raised with the Applicants as matters that warrant investigation and there is a serious question as to whether the concerns raised are a recent invention. Critically, compliance with the processes will result in a substantial and costly intrusion into the external administration, particularly in circumstances where the Liquidators are unfunded. The processes appear to have been issued predominantly for the purpose of attempting to secure a commercial leverage against the Applicants in relation to the pending claims and investigations.”

The Applicants submit that the Respondents’ purpose of creating a “bargaining chip” with the Liquidators in relation to the “looming claims and investigations” that the Respondents face “must be regarded as one prevailing over any subsidiary intention (to the extent that one exists) in seeking, by the issuance of the processes, to advance a legitimate public interest in the company’s external administration.”
The purpose for which the Respondents applied for the examination summonses is a question of fact. For the reasons that follow, the Applicants have failed to discharge their onus of establishing on the balance of probabilities that the Respondents’ predominant purpose was to attempt to secure commercial leverage against the Applicants in relation to the Liquidators’ ongoing investigations and potential claims against Mr Matta.
No complaint was raised with the Administrators or Liquidators concerning the sale process before the Respondents applied to ASIC for eligible applicant status and applied to the Court for the issue of the examination summonses. Contrary to the Applicants’ submissions and Mr Dampney’s contentions, that does not support an inference that the concerns about the sale process are a “recent invention” reacting to the Liquidators’ letter of 10 July 2020 and that the summonses have been issued for the predominant purpose of attempting to secure some commercial leverage against the Liquidators.
The complaint about the sale process as set out in paragraph 39 of Banton Group’s letter to ASIC dated 20 November 2020 relies heavily on the existence of the BEC offer at the time that the Administrators were negotiating exclusively with BJCK, without BJCK having obtained clearance from the ACCC, and the difference between the range of offers made by BEC and the lower price for which the Administrators later sold the business to Chef Fresh Pty Ltd. As referred to at [97] above, there is no evidence about when Mr Matta became aware of the amounts offered by BEC. The evidence does establish that the Administrators kept the offers confidential during the sale process and continued to do so at the second creditors’ meeting after the sale process had concluded and in the report subsequently issued by the Liquidators on 24 August 2020. It would be mere conjecture to infer that the steps taken by the Respondents from November 2020 to apply for eligible applicant status and for the issue of examination summonses were a reaction to the Liquidators’ letter of 10 July 2020, as opposed to a reaction to Mr Matta becoming aware of the prices offered by BEC: Bradshaw v McEwans Pty Ltd (1954) 217 ALR 1 at 5 (Dixon, Williams, Webb, Fullagar and Kitto JJ).
As the Respondents submitted, they were not obliged to raise their complaints or concerns about the sale process with the Applicants informally before applying for eligible applicant status and applying for the issue of examination summonses. Contrary to the Applicants’ submissions, the absence of any such informal approach by the Respondents does not support an inference that the concerns about the sale process articulated in paragraph 39 of the 20 November 2020 letter to ASIC are not genuinely held by the Respondents or that the Respondents’ predominant purpose in applying for the summonses was not to investigate potential claims against the Administrators in relation to the sale process.
That is particularly so in circumstances where, as I have mentioned above, there is no evidence that the Respondents had all of the information giving rise to their concerns before the Administrators concluded the sale to Chef Fresh Pty Ltd. Thus, there is no evidence supporting Mr Dampney’s contention that, if the Respondents’ concerns were genuinely held, they would have made a complaint to the Administrators during the sale process at a time when a different course could potentially have been taken by the Administrators in response to the complaints.
Nor is there any evidence that anything could have been achieved by the Respondents putting to the Applicants after the sale process had concluded that (to adopt the terms in the Respondents’ submissions): “We think you stuffed up the sales process, please comment”. Mr Matta was not challenged in cross-examination about his evidence he understood that the Administrators had simply dismissed concerns that had been raised by several creditors about the sale process at the second creditors’ meeting on 25 May 2020: see [105] above. Mr Dampney’s affidavits are silent about how the Applicants would have responded to any complaints or questions from the Respondents during or after the sale process at any time before they applied for eligible applicant status and for the issue of the examination summonses.
The Respondents’ concerns about the sale process are not speculative, far-fetched or misconceived, to use the language of the Full Court of the Federal Court in Kimberley Diamonds. On the contrary, as the Respondents submitted, their concerns raise matters that are prima facie worthy of investigation, including why the Administrators apparently did not anticipate potential opposition from the ACCC to the proposed sale to BJCK, why the Administrators entered into an exclusivity period with BJCK notwithstanding the risk of ACCC opposition (which then precluded the Administrators from immediately engaging with BEC’s increased offer), and why the Administrators apparently did not pursue BEC’s offer after the sale to BJCK fell through.
I reject the Applicants’ submission that the Respondents are “seeking to have it both ways” by suggesting that the Administrators should have rejected the BJCK offer yet taken advantage of the BEC offer that only rose to the level that it did in order to compete with the BJCK offer. The submission misstates the substance of the Respondents’ concerns, which I have summarised above.
The exploration of the Respondents’ concerns in public examinations falls squarely within the purpose of s 596A as described by Edelman and Steward JJ in Walton at [170]. Public examinations about these matters, unlike responses by the Administrators to informal inquiries in private correspondence, will serve (rather than contradict or stultify) the public interest in the administration or enforcement of the law concerning the Jewel Group and its officers in public dealings in the manner explained by their Honours at [175] of their joint judgment in Walton. Private correspondence about these matters would be no substitute for answers to questions on oath or affirmation in a public examination: Re Normans Wines Ltd (receivers and managers appointed) (in liq) (2004) 88 SASR 541; [2004] SASC 171 at [50] (Mulligan J, Vanstone J agreeing).

Contrary to the Applicants’ submissions, it matters not that Mr Dampney has proffered a detailed explanation of the sale process in his affidavits read in these proceedings. It is not open to the Applicants to attempt to pre-empt public examinations concerning the sale process by adducing evidence that they contend covers the field and demonstrates that there is nothing more to examine: see [122] above.
I reject the Applicants’ submission that “complaint about sale at an undervalue sits ill in the mouth of the [Respondents], given that Mr Matta had himself offered a significantly lower sum that the eventual price to take over the businesses.” As the Respondents submitted, neither Mr Matta’s assessment of the price achievable for the Jewel Group business in February 2019, nor his offer in May 2019, has any bearing on the Respondents’ concerns about how the business came to be sold for $25.5 million in March 2020 notwithstanding that BEC had offered $42 million in July 2019. Mr Matta’s assessment in February 2019 was demonstrated to be wrong by the higher offers that the Administrator’s subsequently received, including the offer from BEC. I accept Mr Matta’s evidence that his May 2019 offer represented what he could afford at the time, rather than his assessment of the value of the business. That evidence is broadly consistent with the evidence elicited from Mr Matta in cross-examination that payment of the $8.176 million demanded by the Liquidators in July 2020 would have exhausted all of his assets. It is not necessary to address the parties’ competing contentions about what (if anything) Mr Matta’s offer entailed in relation to the refinancing of the Jewel Group’s debts to CBA.
In relation to the Respondents’ stated purpose of investigating potential claims of Jewel Holdings against the Applicants for their failure to investigate and prosecute potential claims against CBA, the Applicants submitted that a serious question arises about the genuineness of the potential claims against CBA described in Banton Group’s letter to ASIC dated 20 November 2020 because:

the matters described in that letter arise from issues particularly within the knowledge of the Respondents;

the Administrators had detailed discussions with Mr Matta at the time of their appointment in relation to the arrangements with CBA, and Mr Matta did not inform them about potential claims against CBA; and

the Respondents have declined to offer any funding to the Liquidators to investigate potential claims against CBA now.

The Applicants’ criticisms of Mr Matta for failing to inform them about potential claims against CBA are not without force. However, it does not necessarily follow from the fact that Mr Matta’s evidence would be necessary for any ultimate prosecution of the potential claims against CBA that the existence of the potential claims as a subject worthy of investigation was not apparent from the documents available to the Administrators. As the Respondents submitted and as senior counsel for the Applicants accepted, the description of the potential claims against CBA in Banton Group’s 20 November 2020 letter was based on documents referred to in that letter that form part of the books and records of the Jewel Group, including the facility agreements with CBA and email correspondence with CBA. Accordingly, there is a question whether the Administrators should have identified and pursued claims against CBA on the basis of those documents and approached Mr Matta for such further information or evidence as they may have required, as Mr Matta contends.
The examinations may reveal that the Administrators and Liquidators could not have identified potential claims against CBA based on the documents available to them and without further information from Mr Matta, as the Applicants contend. It may even be that this emerges at an early stage of the examination and the Registrar’s control over the examination precludes the Respondents from questioning the Applicants about the topic further thereafter. However, I do not consider that this possibility renders the Respondents’ complaint about the Applicants’ failure to take steps in relation to potential claims against CBA speculative, far-fetched or misconceived, or renders the issue of the examination summons an abuse of process: see [122] above.
It is not to the point that the Liquidators are now unfunded. The question is whether the Administrators should have taken the steps referred to at [143] above at a time when they did have funding. As the Respondents submitted, Mr Dampney has given the evidence referred to at [99] above that he would have investigated the potential claims against CBA if they had been brought to his attention. That evidence is inconsistent with the Applicants’ submission that lack of funding was self-evidently an obstacle to the Administrators investigating the potential claims at any time (being one of the matters relied on in support of the Applicants’ contention that the Respondents’ purpose in applying for the examination summons cannot be to investigate claims against the Administrators in relation to their alleged failure to investigate claims against CBA).
The Applicants also submitted that the examinations lack utility – demonstrating both illegitimate purpose and oppression – because the Liquidators have no funding now to investigate or pursue potential claims against CBA if the examinations reveal that they should have done so. The Applicants emphasise that the Respondents have declined to provide any funding to the Liquidators for that purpose.
I reject that submission. The examinations may reveal the basis of a claim by the Respondents to remove the Liquidators or to appoint a special purpose liquidator, as referred to below. There is no basis to conclude that, if new liquidators or a special purpose liquidator were to be appointed, they would not be able to raise funds to investigate and pursue potential claims against CBA on behalf of the Jewel Group. The Respondents’ concern that the Liquidators may have a conflict of interest in pursuing CBA, which appointed them as Administrators and provided funding for the administration, would not apply to new liquidators or a special purpose liquidator.
Consistently with Mr Matta’s evidence, the Respondents submitted that they do not seek to gather information through the examinations for the purpose of pursing potential claims against CBA. Rather, they seek to investigate potential claims against the Applicants for their alleged failure to identify and pursue such claims against CBA on behalf of Jewel Holdings and other entities within the Jewel Group.
The Applicants seized on this as a concession or admission by the Respondents. The Applicants submitted that this demonstrates that Mr Matta’s stated purpose is not the true purpose for which the Respondents applied for the examination summonses. The Applicants submitted that the potential claims against CBA are not time barred and could be pursued by Mr Matta now on behalf of the Jewel Group entities, subject to first obtaining leave under s 237 of the Corporations Act. If successful, the Jewel Group entities would recover the full amount of loss or damage caused by CBA’s alleged unconscionable conduct. By contrast, if Mr Matta were to sue the Applicants (on behalf of Jewel Group entities, with leave under s 237 of the Corporations Act) to recover loss allegedly caused by their failure to take steps to prosecute claims against CBA, the claim would be for the value of the Jewel Group’s opportunity to sue CBA. The Applicants submitted that no such opportunity has been lost because the limitation periods applicable to the potential claims against CBA have not yet expired.
Senior counsel for the Applicants submitted that it would be therefore negligent for any solicitor to advise the Respondents to pursue the Applicants rather than to pursue the claims against CBA. It was submitted that this demonstrated that the potential cause of action against the Applicants is “farcical and not genuine” and that the investigation of that asserted cause of action therefore forms no part of the true purpose of the Respondents in applying for the examination summonses.
The Respondents submitted that whether or not it is still open to the Jewel Group to pursue CBA will depend very much on what the Administrators did and said in paying the proceeds of sale of the Jewel Group business to CBA. Putting that issue to one side, it is my respectful opinion that the Applicants’ submissions referred to immediately above overstate the position by assuming that the Respondents’ potential action against them as former Administrators and Liquidators is limited to a claim for damages or compensation. The Applicants submitted that Mr Matta’s reference in paragraph 8 of his affidavit to “potential claims” that Jewel Holdings might have against them for their alleged failure to investigate and pursue claims against CBA on behalf of the Jewel Group plainly means “to sue us for money”.
That is an unduly narrow reading of the words “potential claims”, in my opinion. The words “potential claim” are plainly sufficiently wide to include matters such as a claim for the appointment of a special purpose liquidator, as the Respondents submitted, or a claim for an order under s 90-15 of the Insolvency Practice Schedule removing the Liquidators from office and appointing different liquidators to complete the winding up, including dealing with CBA’s proof of debt and any set off under s 553C of the Corporations Act arising from their investigation of the potential claims of the Jewel Group against CBA.
As the Respondents submitted, paragraph 2 of Banton Group’s 20 November 2020 letter to ASIC described the proposed examinations as being for the purpose investigating and prosecuting potential claims against CBA “with a view to determining whether any further steps or proceedings ought to be taken against the Administrators or Liquidators, including for compensation” (my emphasis). There is no evidence that the Respondents subsequently narrowed the scope of the potential steps contemplated against the Applicants to potential claims for damages or compensation. That is to say, there is no evidence to support the Applicants’ narrow reading of paragraph 8 of Mr Matta’s affidavit referred to above.
For those reasons, I reject the Applicants’ submission that any claim against them would depend on the Respondents establishing good claims against CBA and the loss of the opportunity for the Jewel Group to pursue such claims against CBA. It follows that I also reject the Applicants’ submission that the Respondents’ statement that they do not seek to gather information through the examinations for the purpose of pursing potential claims against CBA indicates that the Respondents do not genuinely intend to pursue potential claims against the Applicants for their alleged failure to investigate the CBA issues.
In any event, an applicant for an examination summons is not required to demonstrate a viable cause of action, let alone that the potential cause of action against a proposed examinee is the best out of alternative potential actions: see [122] above.
The Applicants also submitted that, by Mr Matta’s own assertion in Mr Cruikshank’s letter of 22 May 2019 referred to at [32] above, any causes of action against CBA lie with the Matta Family Trust and not with Jewel Group entities in their own right. I reject that submission. As the Respondents submitted, the 22 May 2019 letter is referring only to any causes of action which form part of the property of the Trust. The causes of action described in paragraph 42 of Banton Group’s letter to ASIC dated 20 November 2020 are claims of Jewel Group entities as opposed to the Matta Family Trust. The alleged breach of the “Additional Funding Promise” relates to losses said to have been suffered by Jewel Group entities as a result of having to deploy cash flow to fund product launches, as referred to at [80] above. Senior counsel for the Applicants accepted that this potential claim against CBA was a claim of the Jewel Group entities in their own right rather than a chose of action forming part of the property of the Matta Family Trust. The potential claims against CBA relating to the “CGT Promise” and the rejection of offers for 247 King St, Mascot referred to at [81] and [82] above are claims for losses allegedly suffered by the Jewel Group as a result of being unable to refinance with another lender in circumstances where CBA was declining to renew the facilities.
I accept the Respondents’ submission that the notion that their predominant purpose is to secure commercial leverage against the Liquidators in relation to their ongoing investigations and potential claims against Mr Matta is fanciful, having regard to the following matters:

Mr Matta has never admitted that the Liquidators’ claims against him have any merit;

assuming for present purposes that those claims do have merit (which Mr Matta denies), the Applicants have not identified any basis for inferring that Mr Matta is assuming that the Liquidators would make a deliberate decision, contrary to their fiduciary and statutory duties, to accede to any “commercial leverage” brought to bear by Mr Matta through the public examinations by sacrificing a potential asset of the Jewel Group for the Liquidators’ own personal benefit; and

almost two years after Mr Matta became aware of the potential claims against him through the Liquidators’ letter of 10 July 2020, Mr Matta is seeking to proceed with public examinations notwithstanding that the Liquidators have not yet been in a position to pursue any claims against him.

In light of Mr Dampney’s evidence that the Liquidators are continuing to explore funding options to pursue claims against Mr Matta, the third element of the Respondents’ submission referred to immediately above carries little weight.
However, the second element has particular force. As the Respondents submitted, the statutory role of the Liquidators takes the matter out of the usual case where a purpose of exerting commercial pressure may be inferred. That is because, in the usual case, litigants may reasonably make a commercial decision that it is in their best interests to discontinue other proceedings in response to pressure being brought to bear against them personally. By way of example, the examination summonses in Newheadspace were found to have been issued on the application of the liquidator to officers of National Rugby League Limited (NRL) to give effect to the purpose of others (legal representatives and a litigation funder) of exerting pressure on NRL through the public examinations to pay various claims asserted by the company in liquidation against NRL. As the Respondents submitted, it is not open to the Liquidators to make a choice to abandon pursuit of their claims against Mr Matta (or their attempts to obtain funding to pursue those claims) in return for something that might be offered by Mr Matta in connection with the public examinations or any claims pursued against the Applicants following the public examinations. A person in Mr Matta’s position could not reasonably expect the Applicants to make such a choice and there is no basis for inferring that Mr Matta holds any such expectation. The existence of such an expectation in the mind of Mr Matta is central to the Applicants’ allegations that he applied for the examination summonses in order to exert commercial pressure against the Liquidators.
Moreover, as the Respondents submitted, Mr Matta is facing a $26 million personal liability on his guarantee and has the prospect of reducing that liability significantly through any successful claim against the Applicants on behalf of the Jewel Group in relation to the sale process or if the potential claims against CBA are investigated by new liquidators or special purpose liquidators and successfully pursued on behalf of the Jewel Group so as to reduce its net debts owing to CBA. That would be of benefit to Mr Matta, irrespective of whether the Liquidators pursue the matters in their 10 July 2020 letter and irrespective of whether Mr Matta may have been “highly concerned”, “concerned to some degree” or “unconcerned” about the 10 July 2020 letter. That points strongly to the Respondents’ predominant purpose being exactly as described in Mr Matta’s affidavit referred to at [101] above – to investigate potential claims against the Applicants in relation to the sale process and their failure to investigate and pursue the potential claims against CBA.
The Applicants placed much weight on Mr Matta’s change of solicitors at some time in the months leading up to Banton Group’s letter to ASIC of 20 November 2020, together with Mr Matta’s failure to provide the response that Mr Cruikshank had foreshadowed to the Liquidator’s 10 July 2020 letter, as indicating a change in Mr Matta’s strategy vis-à-vis the Liquidators and supporting an inference that his predominant purpose in applying for eligible applicant status and in applying for the issue of the examination summonses was to obtain commercial leverage against the Liquidators.
I reject that submission. There is some force in the Applicants’ criticisms of Mr Matta’s failure to provide any response to the Liquidators’ letter of 10 July 2020, despite a response having been promised by his former solicitor. However, as the Respondents submitted, the change of solicitors and the failure to respond to the 10 July 2020 letter do not support a finding on the balance of probabilities that the Respondents’ predominant purpose in applying for the examination summonses is to obtain some sort of “bargaining chip” with the Liquidators for all of the reasons above.
Whilst I have rejected Mr Matta’s evidence that he changed solicitors for no reason (see [74] above), his engagement of Banton Group does not support an inference that this was part of a change of strategy which involved applying for the examination summonses for the predominant purpose of obtaining commercial leverage against the Liquidators in relation to the matters in their 10 July 2020 letter. The evidence does not support any inference other than that, from about September 2020, Mr Matta had greater confidence in Banton Group’s ability to represent his interests in relation to the external administration of the Jewel Group going forward than he had in Mr Cruikshank at that time. The Court will not engage in speculation about the reasons for that state of affairs.
As referred to at [111] above, Mr Dampney stated in his affidavit that, any requirement for the Liquidators to attend extensive examinations will adversely impact their ability to continue to progress the Jewel Group’s liquidation. That statement, being a bare assertion, was admitted into evidence subject to an order under s 136 of the Evidence Act 1995 (NSW) limiting its use to evidence of Mr Dampney’s contention. The Liquidators’ attendance is expected to be required for approximately one day each, as referred to at [112] above. There is no evidence to support to Mr Dampney’s assertion that attendance by each Liquidator for approximately one day, and associated preparation, would adversely impact their ability to continue to progress the winding up of the Jewel Group. Accordingly, the Applicants have not demonstrated that the proposed examinations would involve a substantial intrusion into the liquidation.
The Applicants’ submissions emphasised that the Liquidators are presently unfunded and that the Respondents have not offered to pay their remuneration and costs in relation to their attendance at and preparation for the public examinations. I accept the Applicants’ submissions that the Court’s power to make costs orders in relation to public examinations is not limited to s 597B of the Corporations Act and that the Court may exercise its inherent jurisdiction to prevent abuse of its process by imposing conditions requiring the payment of an examinee’s costs if necessary to prevent the summons from operating in an unjustifiably oppressive manner: Re Equiticorp Finance Ltd; Ex parte Brock (No. 2) (1992) 27 NSWLR 391 (Brock No. 2) at 396-397 (Young J, as his Honour then was); Re Total Entity Pty Ltd (in liq) (2003) 47 ACSR 577; [2003] NSWSC 924 (Total Entity) at [26] (Barrett J, as his Honour then was).

However, I do not think that justice requires such an order in this case where the examinees are officers and a former officer of the corporation, there is a public interest in the examinations for the reasons explained by Edelman and Steward JJ in Walton at [170] and [175], and it is foreshadowed that the examinations require about one day for each examinee. The mere fact that the Liquidators are unfunded does not mean that it is oppressive for them to be required to bear their own costs of complying with the examination summonses issued under s 596A. The Applicants’ submissions emphasised that, in Kimberley Diamonds, the applicant for the examination summons had offered to pay the liquidator’s costs of the examination. No such offer has been made by the Respondents in this case, as I have already mentioned. However, the offer was not decisive in Kimberley Diamonds. The basis of the Full Court’s decision that the examination summons was not unjustifiably oppressive was that the liquidator had led no evidence that was capable of supporting a finding that the proposed examination would be significantly burdensome, costly or intrusive to him or his administration of the winding up (at [88]-[89] of the judgment, set out at [124] above). As I have already mentioned, the Applicants in the present case have led no evidence capable of supporting such a finding.
In my opinion, the circumstances of this case are covered by the “general principle” articulated by Young J (as his Honour then was) in Brock No. 2 that (at 393): “a person who is required by law to come before a court and give evidence has an obligation as a citizen to comply, and is not entitled to any compensation at all.” As the Respondents submitted and as the Full Court of the Federal Court emphasised in Kimberley Diamonds, current and former administrators and liquidators are in no different position than any other current or former officer liable to be summoned for examination under s 596A: see [116]-[117] above. The legal obligation imposed on administrators, liquidators and other officers and former officers of corporations under s 596A reflects the legislative intention underlying Part 5.9 of the Corporations Act that “directors and those engaged in the management of companies should be accountable and, at least in some cases, publicly accountable, for their conduct”: New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 at 619 (Hayne J), citied with approval in Walton at [113] (Gageler J) and at [189] (Edelman and Steward JJ).
Although this has not been determinative, it is appropriate to note that the Applicants have incurred the costs of a two day hearing during which, in support of their application to set aside the examination summonses as an abuse of process on grounds that included oppression, they sought to pre-empt the outcome of the examinations by putting forward Mr Dampney’s evidence in response to the substance of the Respondents’ complaints that are to be the subject of the examinations. That is both contrary to the authorities referred to at [122] above and difficult to reconcile with the Applicants’ contention that the time and costs involved in each of the Liquidators attending a public examination for approximately one day would be so oppressive as to constitute an abuse of process.
I will address the costs of compliance with the orders for production separately below.
Finally, I reject the Applicants’ submission that the examination summons issued to Mr Parbery should be discharged on the basis that it is so lacking in utility that it reflects an illegitimate purpose or is oppressive. The Applicants submit that the proposed examination lacks utility because Mr Parbery ceased being an administrator from 15 May 2020 and recorded only 25 hours of work in relation to the Jewel Group administration. The Applicants relied on the alleged lack of utility as supporting an inference that the Respondents had applied for the examination summonses for the predominant purpose of obtaining commercial leverage against the Liquidators in their pending investigations and potential claims against Mr Matta. I accept the Respondents’ submissions that the limited work performed by Mr Parbery sheds no light on the appropriateness of any work done by him in relation to the sale process or the question whether the Administrators should have investigated and pursued potential claims against CBA on behalf of the Jewel Group. The limited work done by Mr Parbery may raise a question about whether his duties required him to do more.
For the foregoing reasons, the application to discharge the examination summonses as an abuse of process will be dismissed.

Consideration and determination: Orders for production

In addition to the examination summonses, the Respondents sought and obtained an order under s 68 of the Civil Procedure Act 2005 (Cth) in respect of each of the Applicants requiring them to produce three categories of documents.
The first category is certain kinds of documents during the period from the date of the Administrators’ appointment relating to the sale process for the business of the Jewel Group. The end date of the relevant period specified in the notice is 15 July 2021, but I understand from the parties’ submissions that the Respondents have agreed to read that end date down to June 2020 so as to correspond with the timing of the completion of the sale to Chef Fresh Pty Ltd.
The second category and third categories are:

“2. All Documents or correspondence in the period 1 January 2018 to date between the Administrators or Liquidators of KPMG and CBA concerning Jewel Fine Foods or its assets or undertakings.
3. All Documents in the Relevant Period concerning any investigations into any potential claims against CBA.”

The Applicants seek orders setting aside the production orders on the grounds that:

they have been issued in aid of the examination summonses which are an abuse of process, so it must follow that the production orders should also be set aside as an abuse of process; or

the production orders are unjustifiably oppressive to the Applicants due to the costs that the Applicants would incur in order to comply with them.

I reject the first basis of the application for all of the reasons explained above in relation to the examination summonses.
The second basis of the application is concerned solely with the costs of complying with the production orders. The Applicants did not contend that the categories of documents required to be produced extended beyond the scope of the examinable affairs of Jewel Holdings or beyond the scope of the subject matters identified by the Respondents for the examinations.
The evidence concerning the work that will be required to comply with the production orders and the estimated costs of that work was in a state of flux at the time of the hearing. The parties had been negotiating about a process for identifying documents caught by the orders with a view to reducing the time and cost involved to comply with the orders. The status of those negotiations at the time of the hearing may be summarised as follows.
The Applicants have 143,000 documents on their database relating to the external administration of the Jewel Group.
The Applicants have proposed to the Respondents that the production orders be dealt with in the following manner:

“1.   The [Respondents] propose search terms for the Applicants to run over their document database in relation to each of the categories listed in the Production Orders.
2.   The Applicants will then run those search terms across their document database and communicate to the [Respondents] the volume of documents that respond to the search terms proposed by the [Respondents].
3.   The [Respondents] can then decide whether the search terms should be refined further (to reduce the volume of documents).
4.   Once the parties have reached an agreement as to the volume of documents to be reviewed, KWM will then provide an estimate to the [Respondents] as to the cost of the review. This estimate will ensure that alternative technology review methods are used as much as possible to ensure the review is conducted as efficiently as possible.
5.   Once the estimate is agreed as between the parties, the [Respondents] will transfer the estimated cost of the review into the Banton Group’s trust account to be paid to the Applicants once the review is completed and production has occurred.”

Whilst acknowledging the difficulty of estimating the costs associated with “large scale document review”, the Applicants’ solicitor has estimated that, if the number of documents to be reviewed were reduced to between 20,000 and 30,000 documents, the costs of complying with the production orders would be approximately $204,625 and $362,500 on the basis (in each instance) of a first tier review being undertaken by paralegals and junior solicitors and a second tier review of approximately one half of the documents identified as responsive in the first tier review being undertaken by a combination of senior lawyers and one senior associate.
The Respondents replied to the Applicants’ proposal the day before the hearing of the present application. The Respondents agree with paragraphs 1 to 3 of the Applicants’ proposal. However, in lieu of paragraphs 4 and 5 of the Applicants’ proposal, the Respondents suggested that the Applicants should simply produce the documents yielded by the agreed search terms with the exception of any documents exchanged between the Applicants and their lawyers (referred to by the Respondents as the potentially privileged documents). The Applicants’ review of documents would then be limited to the potentially privileged documents and the Respondents will pay the Applicants’ reasonable costs associated with reviewing those potentially privileged documents.
As the Applicants submitted, the Respondents’ proposal would require them to hand over documents other than communications with their lawyers that may well contain privileged communications. I accept the Applicants’ submission that the proposal is untenable as it would risk infringing their substantive right to maintain client legal privilege in communications to which that privilege applies.
At the time of the hearing, the parties had not commenced the process of negotiating search terms. Both parties emphasised that the Court was not being asked to engage in an exercise of reading down the production orders or settling search terms.
The Applicants’ contention in relation to oppression is that it is oppressive for them, as unfunded Liquidators, to be required to incur any costs in complying with the production orders. As senior counsel for the Applicants put it, the Liquidators do not operate as a charity. The Applicants therefore seek:

an order setting aside the production orders as oppressive; or

an order addressing the alleged oppression by attaching conditions to the production orders to the effect of paragraphs 1 to 5 of the Applicants’ proposal referred to at [82] above, which would require all of the Applicants’ costs of compliance to be paid by the Respondents.

As referred to at [168] above, the Court has inherent jurisdiction to prevent abuse of its process by setting aside a production order or imposing conditions as to costs of producing the documents if that is necessary to prevent the order from operating in an unjustifiably oppressive manner. That inherent jurisdiction exists independently of the Court’s power under s 597B of the Corporations Act, where an examination summons was obtained without reasonable cause, to order some or all of the costs incurred by an examinee because of the summons to be paid by the applicant for the summons or any person who took part in the examination.
I accept that an application for an order under s 597B in respect of the costs of producing documents under an order for production issued in aid of an examination summons is ordinarily determined at the conclusion of the examination and at the same time as any application for an order under that section in respect of the costs of the examination. That is because it is appropriate for such applications to be determined when the Court is in a position to see what expense, trouble and inconvenience the examinees and producing parties have in fact incurred and to assess the conduct of the party who conducted the examination in imposing those burdens on the examinees and producing parties: Total Entity at [26]-[27] (Barrett J, as his Honour then was); Re Southland Coal Pty Ltd (recs and mngrs apptd) (in liq) (2006) 58 ACSR 113; [2006] NSWSC 184 at [101]-[102] (Austin J).
In my opinion, different considerations apply where an application for compliance with a production order to be conditional upon payment of costs is made on the basis that the condition is necessary to prevent unjustifiable oppression that would otherwise be occasioned by compliance with the order. If such applications are deferred until after documents have been produced in compliance with the order and examinations have been completed, the person against whom the order was issued is forced to endure what may subsequently be found to be oppression occasioned by the applicant’s use of the Court’s process for a period of time before the oppression can be ameliorated by an order for costs. Generally speaking, any unjustifiable oppression that will result from use of the Court’s processes should be addressed before it occurs (thereby avoiding abuse of process) rather than cured after the event. For that reason, I do not accept the Respondents’ submission that the Applicants’ allegations of oppression in the present case should be deferred until the conclusion of the examinations merely because that it what is typically done in relation to applications for costs relying on s 597B of the Corporations Act.
I reject the Applicants’ submission referred to at [187] above that it is oppressive for them to be required to incur any costs in complying with the production order, essentially for the same reasons that I have articulated at [170] above in circumstances where the examination summonses are not an abuse of process and there is no suggestion that the production orders require production of documents outside the scope of the matters about which the Respondents propose to examine the Applicants.
As I have already mentioned, the parties are sensibly seeking to reach agreement about the processes to be undertaken in order to comply with the production orders (assuming that they are not set aside). As a result of those ongoing negotiations, the scope and estimated cost of the work required to comply with the production orders is not presently known. Accordingly, it is not possible to determine at this stage whether or not the orders for production are unjustifiably oppressive. The appropriate course in my opinion is to stand over prayers 2 and 5 of the Applicants’ interlocutory process (being the prayers that seek relief in relation to the production orders) for a period of two weeks to enable the parties to conclude their negotiations. The question whether the production orders occasion unjustifiable oppression can then be considered having regard to the known scope of work and estimated costs of compliance with the orders, viewed in the context of the public interest in the external administration of the Jewel Group, the Applicants’ roles as officers and former officers of the entities comprising the Jewel Group, the legislative intention underlying Part 5.9 of the Corporations Act that they be held accountable as such and their legal obligation under s 596A to attend for the examinations in aid of which the summonses have been issued.

Conclusion

The Applicants have failed to establish that the examination summonses are an abuse of process. The application to discharge those summonses in prayer 1 of the interlocutory process filed on 23 August 2021 is to be dismissed.
It is not possible to determine at this time whether the orders for production are unjustifiably oppressive so as to constitute an abuse of process. Prayers 2 and 5 of the interlocutory process are to be stood over for a period of two weeks.
Prayer 3 of the interlocutory process, which sought access to the affidavit filed by the Respondents in support of the application for the examination summonses, was not pressed because the Respondents had made that affidavit available to the Applicants prior to the hearing of the interlocutory process.
Prayer 4 of the interlocutory process seeks an order for costs pursuant to s 597B of the Corporations Act. To the extent that the order is pressed notwithstanding my finding that the examination summonses are not an abuse of process, it is not appropriate for determination at this stage for the reasons referred to at [189] above and prayer 4 is therefore to be dismissed without prejudice to the Applicants’ right to make a further application under s 597B at the conclusion of the examinations.
The Applicants indicated that they would wish to be heard in relation to the costs of their interlocutory process, irrespective of its outcome. Such a hearing can be facilitated, orally or on the papers, after prayer 2 of the interlocutory process is determined.
The orders and directions of the Court are as follows:

Prayers 1 and 4 of the interlocutory process filed on 23 August 2021 are dismissed.

Note that prayer 3 of the interlocutory process is not pressed.

Prayers 2 and 5 of that interlocutory process are adjourned to 9.00am on 14 April 2022 for directions as to the further hearing of those prayers and as to the costs of the interlocutory process.

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Endnotes

Decision last updated: 31 March 2022

Medium Neutral Citation:	In the matter of Jewel of India Holdings Pty Ltd [2022] NSWSC 356
Hearing dates:	15 and 16 March 2022
Date of orders:	30 March 2022
Decision date:	30 March 2022
Jurisdiction:	Equity - Corporations List
Before:	Williams J
Decision:	Application to set aside summonses issued under Corporations Act 2001 (Cth), s 596A dismissed. Application to set aside orders for production issued under Civil Procedure Act 2005 (NSW), s 68 adjourned for directions as to a further hearing.
Catchwords:	CORPORATIONS – application to set aside examination summonses and orders for production – summonses issued under Corporations Act 2001 (Cth), s 596A to former administrators and liquidators of company in liquidation on the application of former director and shareholder and claimed creditor of the company to whom eligible applicant status had been granted – where applicants’ stated purpose of the examinations is to investigate potential claims against former administrators and liquidators in relation to (a) the sale of the company’s business and (b) their failure to investigate potential claims of the company against its secured lender – whether stated purpose genuinely held – whether examination summonses issued for the predominant purpose of former director attempting to secure commercial leverage against liquidators in relation to claims foreshadowed by the liquidators against the former director – where liquidators unfunded – whether examinations and orders for production unjustifiably oppressive.
Legislation Cited:	Corporations Act 2001 (Cth), ss 596A, 597B
Cases Cited:	Bradshaw v McEwans Pty Ltd (1954) 217 ALR 1 Re Equiticorp Finance Ltd; Ex parte Brock (No. 2) (1992) 27 NSWLR 391 Re Godfrey (as liquidator of Pobje Agencies Pty Ltd) (2007) 61 ACSR 54; [2007] NSWSC 138 Kimberley Diamonds Limited v Arnautovic (2017) 252 FCR 244; [2017] FCAFC 91 New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 Re Newheadspace Pty Ltd (in liq) (2020) 144 ACSR 224; [2020] NSWSC 173 Re Normans Wines Ltd (receivers and managers appointed) (in liq) (2004) 88 SASR 541; [2004] SASC 171 Re Southland Coal Pty Ltd (recs and mngrs apptd) (in liq) (2006) 58 ACSR 113; [2006] NSWSC 184 Re Total Entity Pty Ltd (in liq) (2003) 47 ACSR 577; [2003] NSWSC 924 Walton v ACN 004 410 833 Ltd (formerly Arrium Ltd) (in liq) [2022] HCA 3 Williams v Spautz (1992) 174 CLR 509
Category:	Principal judgment
Parties:	James Douglas Dampney (First Applicant) Peter James Gothard (Second Applicant) Stephen James Parbery (Third Applicant) Mr Kishore Matta (First Respondent) Avia Corporate FS Pty Ltd ACN 164 538 354 (Second Respondent)
Representation:	Counsel: Mr J K Kirk SC and Mr J Hynes (Applicants) Mr M A Izzo SC and Ms J Shepard (Respondents) Solicitors: King & Wood Mallesons (Applicants) Banton Group (Respondents)
File Number(s):	2021/202957
Publication restriction:	N/A