In the Matter of Re Southern Equities Corporation Ltd (in Liq): Alan Bond v Richard England No. Scgrg-93-92516 Judgment No. 6270 Number of Pages 24 Corporations
[1997] SASC 6270
•1 August 1997
IN THE SUPREME COURT OF SOUTH AUSTRALIA
DEBELLE, J
Corporations - companies - winding up - conduct and incidents of liquidation - examination by liquidator - application to set aside orders for examination - order for examination was an abuse of process - improper purpose - whether applicant entitled to examine confidential affidavits - whether full disclosure - whether proper service of order for examination - application dismissed. Williams v Spautz (1992) 174 CLR 509; Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWLR 582; Re John Arnold's Surf Shop Pty Ltd (in liq) (1979) 23 SASR 222; Re Rothwells Ltd (No 2) (1989) 7 ACLC 576; Hamilton v Oades (1989) 166 CLR 486; Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512; Gerah Imports Pty Ltd v The Duke Group (in liq) (1993) 61 SASR 557; Re The Duke Group Ltd (in liq) (1994) 119 ALR 401; Alder v Quintex (1996) 22 ACSR
446; Re Spedley Securities Ltd (1990) 8 ACLC 669; Joye v Beach Petroleum NL
(1996) 137 ALR 506; Re British and Commonwealth Holdings PLC (Nos 1 & 2) [1992] Ch 342; Re Excel Finance Corporation Ltd, Worthley v England (1994) 52 FCR 69; Re Stirling Henry Ltd (1972) 1 NSWLR 497; Shwapowloff v Stirling Henry Ltd (in liq) (1972) 2 NSWLR 691; Re Suncoast Tile Merchants Pty Ltd (No 2) 11 ACLR 52; Re BPTC Ltd (1992) 10 ACLC 271; Re Laurie Cottier Productions (in liq) (1992) 9 ACSR 513; Re Imperial Continental Water Corporation (1886) 38 Ch.D. 314; Henderson v Henderson (1843) 3 Hare 100 at 115; 67 E.R. 313 at 319; Geroff v Thomas (unreported, Court of Appeal Queensland, 14 October 1994) ; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, applied. Simionato & Farrugia v Macks (1995) 19 ACSR 34, distinguished. Sherlock v Permanent Trustee Australia Ltd (1994) 22 ACSR 16, considered.
Procedure and practice - service of proceedings - order for examination by liquidator - order made in South Australia for service in Western Australia - whether order a subpeona. Evidence Act (SA) 1929 s59E(1); Corporations Law s596A, 596B; Service and Execution of Process Act (Cth) 1992 s3, 8(3), 39, 40, 41; Prisons Act (WA) 1981 s22; Correctional Services Act (SA) 1982 s28; ActsInterpretation Act (SA) 1915 s25, referred to. Fenbury Ltd (in liq) v Hong Kong & Shanghai Banking Corporation Ltd 185 LSJS 280, applied.
ADELAIDE, 25 June, 29-30 July 1997 (hearing), 1 August 1997 (decision)
#DATE 1:8:1997
#ADD 22:9:1997
Appearances:
Plaintiff:
Counsel: Mr A Harris with Mr R Clarke
Solicitors: Cowell Clarke
Defendant:
Counsel: Mr R Whitington QC with Mr Hoffmann
Solicitors: Fisher Jeffries
Order: application dismissed.
DEBELLE, J
This is an application to set aside an order made pursuant to s596B of the Corporations Law for Mr Alan Bond to attend before this court for examination. The liquidator of Southern Equities Corporation Ltd (in liquidation) ("SECL") has been conducting a series of examinations of officers of SECL and other persons who have taken part or been concerned in examinable affairs of SECL. The examinations are almost complete. SECL was formerly called Bond Corporation Holdings Ltd. Mr Alan Bond was chairman of directors and an executive director of Bond Corporation Holdings Ltd before the financial crash of that company and other companies in the Bond group.
The application is made on several grounds and seeks a variety of orders. Before noting the terms of the application, and the facts which lead to it, it is necessary to identify the affidavits relied on by the parties. Of the several affidavits which were filed in support of or opposing the application, the only affidavits admitted were those sworn by Mr J C Clarke on 6 June and 25 June 1997, Mr J D Karas on 23 June 1997, and Mr M C J Hoffmann on 23 June 1997.
The bulk of these reasons had been prepared before Mr Bond made a further application. As that application did not cause me to alter my conclusions, I have not gone back and amended these reasons. Instead, the extent to which the application touches upon these reasons is noted in the last section of these reasons headed "A Subsequent Application".
An Order for Examination
Mr Bond is serving an order of imprisonment at Karnet Prison Farm at Serpentine in Western Australia. He is not due to be released until 1999. The liquidator applied for an order for the examination of Mr Bond. On 24 April 1997 Master Bowen Pain made an order pursuant to s596B of the Corporations Law that Mr Bond be summoned to attend for examination. Although Mr Bond was at one time an examinable officer of SECL, he had resigned as a director in 1990 and did not fall within any of the criteria listed in s596A of the Corporations Law. The order for examination was, therefore, made pursuant to s596B.
The order was made in the form of Form 10 of the Corporations Rules: see Rule 48. The Master made other orders in addition to the order for examination. One order granted leave to serve the order out of the jurisdiction. Another ordered that this court should sit in the State of Western Australia to hear the examination of Mr Bond. The Master also ordered that the examination be conducted at the Karnet Prison Farm. The operative parts of the order were in these terms:
"1. That ALAN BOND of Karnet Prison Farm, Kingsbury Drive, Serpentine in the State of Western Australia be examined before the Court pursuant to Section 596B of the Corporations Law.
2. That the said ALAN BOND is hereby summoned to attend before the Court at Karnet Prison Farm, Kingsbury Drive, Serpentine in the State of Western Australia on Thursday the 22nd day of May 1997 at 10.00am to be examined on oath in respect of the examinable affairs of the abovenamed company.
3. That the examination of ALAN BOND be held in private.
4. That ALAN BOND not disclose the existence of this order to any person other than his legal advisers, such legal advisers not to disclose the existence of the Order to any other person.
5. That this Court sit outside the State and in Western Australia for the purpose of hearing the examination of the said ALAN BOND.
6. That to the extent necessary the applicant may serve this order out of the jurisdiction.
7. That any person interested be at liberty to apply within seven (7) days to vary or discharge this order.
8. That further consideration of this order is adjourned to the time of the said examination.
9. That the costs of and incidental to this order and the examination be paid out of the assets of the company."
The order that the court sit outside South Australia and in Western Australia was made pursuant to s45(2) of the Supreme Court Act 1935. A similar power exists in s59E(1) of the Evidence Act 1929. The order granting leave to serve the order out of the jurisdiction was made pursuant to Rule 18.07 of the Supreme Court Rules. The operation of Rule 18.07 was examined in Fenbury Ltd v Hong Kong & Shanghai Banking Corporation Ltd (1996) 185 LSJS 280. The order was validly made. It was served on 29 April 1997.
The Examination is Adjourned
The examination of Mr Bond at the Karnet Prison Farm was ordered to be held on 22 May 1997. Master Bowen Pain travelled to Western Australia and went to the gaol for the purpose of conducting the examination. Both the liquidator and Mr Bond were represented by counsel. Mr R J Whitington QC appeared for the liquidator. Mr A Howard QC appeared for Mr Bond. Mr Bond himself was not present.
Before the examination commenced, Mr Howard QC raised several objections to the examination. He stated that Mr Bond would not make himself available for examination unless he was lawfully compelled to be present. The issues being agitated revolved around procedural difficulties said to flow from the fact that the Supreme Court of South Australia was sitting in Western Australia and the fact that an order had not been obtained pursuant to s22 of the Prisons Act (WA) 1981 to bring up Mr Bond for the examination. Mr Howard QC questioned the authority of the Master to administer an oath and the power of the Court to punish a contempt. In no respect did he challenge the making of the order on 24 April. He did not challenge the validity of the order, he did not apply to set that order aside, and he did not object to the validity of the service of that order on 29 April. The objection which was immediately acted on was an objection that it was necessary for an order to be made pursuant to s22 of the Prisons Act that Mr Bond be brought before the court sitting at the Karnet Prison Farm. Mr Howard submitted that, in the absence of such an order, Mr Bond could not be required to attend the examination. The Master adjourned the proceedings for a short time to enable an application to be made for such an order. The application was made orally by telephone to Heenan J of the Supreme Court of Western Australia. Justice Heenan adjourned the hearing and made directions for the filing of written submissions. On learning that Heenan J had adjourned the hearing, the Master ordered the examination to be adjourned to a time and place to be fixed. Before adjourning the examination the Master made some observations including the following:
"As has been indicated, it is necessary to adjourn this matter in view of the part heard application before Heenan J. In order to put this matter into its proper context, it should be indicated that when the matter of the examination of Mr Alan Bond was raised by the liquidator's solicitors, the question of the location of the examination and the circumstances was raised before me and in view of the confidentiality orders which were sought and in view of the possible attack on Mr Bond should the confidentiality orders be broken in any way, I indicated that I thought that if it was possible for the examination to be conducted here at the prison farm that the court would come to Mr Bond, so to speak.
I mention that for two purposes: One is that I don't want it to be suggested that the court or anybody else, for that matter, is using an examination at this place as a matter of oppression to Mr Bond; secondly, that the court has to examine its own position.
It's my intention to adjourn this matter to a place and time to be determined, because in the light of some of the submissions that have been put, I think we could still end up with a farcical situation if I simply adjourn the examination at this place. I propose to, as I say, adjourn it to a time and place to be fixed. I will list it for a mention at a time when Heenan J might be anticipated to have delivered his reasons...
Perhaps I should also indicated that I, on behalf of the Supreme Court of South Australia, may well make some decision myself and it may well be before 23 June. I will obviously try not to do anything in the week before that, so that Mr Harris is at least available. But I accept that we've got to respect the individual's rights and obligations, but the court can only go so far and when the court starts being put to a disadvantage, then the court's got to look after its own interests."
The last paragraph suggests that the Master was considering making an order on his own motion.
The Master Initiates An Order
The Master decided to act on his own motion. He called the matter on for hearing on 26 May 1997. Notice of the hearing was given to the solicitors for Mr Bond. Mr Bond was represented by Mr Harris. The Master announced that, having considered the matter further, he intended to order that the examination of Mr Bond take place in Adelaide and that he intended to direct the solicitors for the liquidator to take such steps as were necessary to have Mr Bond brought to Adelaide. The Master's reasons for acting in this way are stated in a report to me which was shown to both counsel at the commencement of the hearing of this application. He believed that it was obvious that Mr Bond would take every point available to prevent the examination. In addition, he believed that, if it proved necessary to deal with a contempt, procedural difficulties might arise if the examination were conducted in Western Australia. He decided to recall his order that the examination be conducted at Karnet Prison Farm and order that the examination be conducted in Adelaide.
Mr Whitington QC appeared for the liquidator at the hearing on 26 May. He adopted the Master's proposal. He handed draft minutes of order to the Master and to Mr Harris. After the hearing on 22 May and in light of the comments made by the Master when adjourning the examination, Mr Whitington had advised the liquidator's solicitors to prepare an application for an order that the hearing be resumed in Adelaide and to prepare an application under Part 3, Division 2 of the Service and Execution of Process Act 1992 (Cth) which provides a procedure to bring prisoners from a gaol in answer to a subpoena. The liquidator's solicitors, therefore, had already prepared minutes of order.
The Master made an order varying his order of 24 April. The effect of this order was that the examination take place before this Court in Adelaide on 1 July 1997. He also ordered that Mr Bond not disclose the existence of the order to any person other than his legal advisers. The order reads:
"UPON HEARING Mr Whitington QC and Mr Karas of Counsel for the Liquidator and Mr Harris of Counsel for the examinee IT IS ORDERED:
1. That the Orders made on the 24th day of April 1997 be varied be deleting paragraph 5 thereof.
2. That the adjourned examination of ALAN BOND pursuant to the Order of this Honourable Court made on the 24th day of April 1997 take place at 9.30am on Tuesday the 1st day of July 1997 at which time ALAN BOND is required to attend before this Court at Sir Samuel Way Building, Victoria Square, Adelaide in the State of South Australia for further examination and thereafter until such examination has been completed.
3. That ALAN BOND not disclose the existence of this Order to any person other an than his legal advisers, such legal advisers not to disclose the existence of the order to any other person.
4. That the costs of and incidental to this Order be paid out of the assets of the company."
It will be noticed that the preamble does not include any recital that the orders were made on the application of a party. Presumably that was because the order was made on the Master's own motion. However, it is apparent that the liquidator readily acceded to the Master's proposal. I therefore deal with this application on the footing that it was the liquidator who sought and obtained the order. In any event, the issue whether the orders made on 26 May were made by the Master on his own motion or were made in consequence of the liquidator's application is not, I think, material to the question whether the order constituted an abuse of process. I deal with the issue of abuse of process later in these reasons.
The effect of paragraph 1 of the order of 26 May was to delete the order requiring the examination to be held in Western Australia. Paragraph 2 then ordered that the adjourned application take place in Adelaide. As the order required Mr Bond to come to South Australia, it was necessary to take steps to bring him from the Karnet Prison Farm to Adelaide for the examination. Part 3, Division 2 of the Service and Execution of Process Act provides for service of subpoenas addressed to persons in prison. At the hearing on 26 May Mr Whitington QC, therefore, made an oral application for an order pursuant to s39 of the Service and Execution of Process Act. The application was supported by minutes of order. The matter was adjourned to 27 May to enable the solicitors for liquidator to redraft the minutes of the proposed order. It was acknowledged that, notwithstanding his presence at the hearing on 26 May, Mr Harris had not abandoned any objection to the capacity of Master Bowen Pain to compel Mr Bond to come to Adelaide or that he had acquiesced in the order. That acknowledgment was re-iterated at the hearing on 27 May.
On 27 May 1997 the Master made an order pursuant to the Service and Execution of Process Act and other orders. Those orders were in these terms:
"1. That pursuant to Section 39(1) of the Service and Execution Process Act 1992 ALAN BOND of Karnet Prison Farm, Kingsbury Drive, Serpentine, in the State of Western Australia be produced at Sir Samuel Way Building, Victoria Square, Adelaide in the State of South Australia on Tuesday the 1st day of July 1997 at 9.30am.
2. That this Order be addressed to GARY BYRON of Ministry of Justice, Level 16, Westralia Square, St Georges Terrace, Perth in the State of Western Australia in his capacity as Custodian of ALAN BOND.
3. That the costs of and incidental to the compliance with this Order including travelling expenses be paid to GARY BRYON by the Liquidator at least fourteen (14) days before the date for compliance with the Order."
The recital states that the order had been made on the application of the liquidator. On 29 May 1997 counsel for the liquidator and Mr Bond sent a facsimile transmission to Heenan J informing His Honour of the proceedings on 26 and 27 May and stating that Mr Bond had indicated that he proposed to challenge the orders then made. They asked His Honour to adjourn the hearing of the application made under s22 of the Prisons Act (WA). The application has been adjourned sine die. On 30 May 1997 the Master also informed Heenan J of the orders which had been made on 26 and 27 May 1997.
The orders of both 26 May and 27 May were served on both Mr Bond and Mr Byron as his custodian. Service on Mr Bond was effected on 1 June. In addition, both Mr Bond and Mr Byron were served with the notice required by s41 of the Service and Execution of Process Act. As will be seen, Mr Bond challenges the validity of the order made on 27 May on the ground that the Master had no power to make it. In addition, he says the service of the order is invalid in that the liquidator has failed to comply with the terms of s40 of the Service and Execution of Process Act.
The Action No 113 of 1996
These orders for examination were made while there is pending in this Court Action No 113 of 1996 in which Mr Bond is a defendant. The action was issued on 2 January 1996. The plaintiffs seek to recover paintings said to belong to SECL or damages for wrongful dealings with them. The plaintiffs are SECL, Bond Corporation Pty Ltd ("BCPL"), and Mr England as liquidator of SECL. BCPL is wholly owned direct subsidiary of SECL. It is alleged that BCPL provided administrative and financial services to SECL. Its accounts were consolidated with those of SECL for the purpose of the preparation of the SECL Group accounts. Although the paintings are alleged to be assets of SECL, BCPL has been named as a co-plaintiff because the paintings were listed in the fixed asset register of BCPL. In addition, it is alleged that at all material times BCPL acted as the agent of SECL.
The defendants are Mr Alan Bond, the trustees of the estate of Mr Peter Beckwith deceased, Tambar Pty Ltd, Mr Craig Bond, Hullmes Pty Ltd, Ms D J Caboche, Mr John Bond and SHC International Inc. Mr Beckwith was managing director of SECL. It is alleged that he and Mr Alan Bond were directors and executive officers of both BCPL and SECL.
Tambar Pty Ltd is a company which, it is alleged, was at all material times controlled by Mr Craig Bond. Mr Craig Bond is the son of Mr Alan Bond and it is alleged that he was a director of Tambar Pty Ltd, an alternate director of SECL, a director of Hullmes Pty Ltd from no later than 8 August 1991, and the controller of SHC International Inc. Hullmes Pty Ltd is a company which, it is alleged, is ultimately controlled by Mr Craig Bond. It is alleged that the directors of Hullmes Pty Ltd included Mr Alan Bond (until 8 August 1991), Ms Caboche (until 25 September 1992), Mr Craig Bond (from no later than 9 August 1991) and Mr John Bond (from no later than 8 August 1991 until 21 April 1992). It is also alleged that Ms Caboche was and is the secretary and financial controller of Hullmes Pty Ltd.
Ms Caboche is alleged to be a director and secretary of Dallhold Pty Ltd and of companies in the Dallhold Group including Hullmes Pty Ltd. Mr John Bond is a son of Mr Alan Bond. It is alleged that he was an executive director of SECL from June 1986 until 19 July 1991 and a director of Hullmes Pty Ltd from 8 August 1991 to 21 April 1992. SHC International Inc is a body corporate incorporated in the Bahamas. It is alleged that Mr Craig Bond is the ultimate controller of SHC International Inc.
Shortly stated, the statement of claim alleges that in 1989 SECL owned paintings valued in excess of $6,000,000; that, in early 1990, those paintings were sold for a little under $1,000,000, a sum considerably less than their true value; and that these sales were effected by means of transactions which were not at arm's length, which were fraudulent, or which were a sham. The statement of claim contains allegations as to subsequent dealings in the paintings. It is alleged that all dealings in the paintings are void and should be set aside. The plaintiffs claim they have suffered financial loss and damage totalling in excess of $5,000,000 which, with compound interest, aggregates to a claim in excess of $12,000,000. In addition the plaintiffs seek exemplary damages and other relief.
The allegations are particularised in some detail as against all defendants averring their respective participation in the fraudulent dealings alleged in the statement of claim. The statement of claim consists of 130 pages and contains at least 289 paragraphs. As against Mr Bond it is alleged that he acted in breach of his statutory and fiduciary duties as a director, that he knowingly instigated, directed and participated in the fraudulent or sham transactions which he knew were of no commercial benefit to SECL and BCPL, that he acted in a way which caused the plaintiff companies substantial financial loss, that he did not act bona fide in the best interest of the plaintiff companies, that he acted fraudulently, and that he made improper use of his position as a director and executive director of the plaintiff companies. The allegations against Mr Bond are particularised in some detail. It is apparent from this brief summary that the statement of claim makes serious allegations of fraud and dishonesty against him. Similar allegations are made against the estate of Mr Beckwith. As against the other defendants, it is alleged that they knew and participated in the wrongful dealings. The statement of claim sets out in some detail the allegations of their respective roles in those dealings.
The summons and statement of claim were issued on 2 January 1996. The liquidator took this course in order that none of the causes of action to recover the alleged assets of SECL would be statute barred. The liquidator wished to preserve the causes of action pending further investigations.
The liquidator did not attempt to serve the proceedings immediately after they had been issued. Instead, immediately upon the institution of the proceedings, he sought and obtained an order that the issue of the proceedings be confidential so that they would not prejudice his conduct of the examinations. The orders of confidentiality were made on 2 January 1996 and were renewed from time to time. The summons was also renewed from time to time.
On 21 February 1996 Mr Hoffmann informed Master Bowen Pain that the proceedings had been issued. He named each of the plaintiffs and each of the parties who had had any alleged involvement in the transactions the subject of the examinations. He informed the Master in broad terms of the allegations made and the relief sought. He said that the purpose of issuing the proceedings had been to protect the potential causes of action against expiry of the relevant periods of limitation. This disclosure was made orally from the bar table. It was not set out in an affidavit.
On 3 May 1997 the statement of claim was amended. The amendments were extensive and, I infer, quite a number of amendments were made in consequence of information gleaned in earlier examinations of other persons. Some of those amendments concern the allegations against Mr Alan Bond. The liquidator decided to serve the summons and statement of claim. Mr Alan Bond was served on 5 May 1997. The orders as to confidentiality expired on 30 May 1997.
The Present Application
It is against that background that Mr Bond has applied to set aside the orders for examination and other orders. Omitting paragraph 1 which is not now relevant, the applications are for the following orders :
"2. A declaration that service of a summons issued pursuant to an order made pursuant to Section 596B of the Corporations Law for Alan Bond to attend before this Honourable Court for examination has not been effected.
3. In the alternative, that the orders of Judge Bowen Pain made on 24 April 1996 by which he ordered pursuant to Section 596B of the Corporations Law that a summons issue requiring that Alan Bond attend before this Honourable Court for examination be discharged.
4. That the order of Judge Bowen Pain on 26 May 1997 varying his earlier order of 24 April 1997 and further ordering that the examination of Alan Bond take place at 9.30am on Tuesday 1 July 1997 in Adelaide be set aside as an abuse of process.
5. That the order of Judge Bowen Pain of 27 May 1997 which purported to be made pursuant to Section 39(1) of the Service and Execution of Process Act 1992 (Cth) be set aside as beyond power.
6. That the order of Judge Bowen Pain of 27 May 1997 which purported to be made pursuant to Section 39(1) of the Service and Execution of Process Act 1992 (Cth) be set aside as an abuse of process.
7. That the date fixed by Master Bowen Pain for the examination of Alan Bond on 1 July 1997 be vacated.
8. That the examination of Alan Bond be permanently stayed as an abuse of process.
9. That the affidavits filed in support of the liquidator's application for the issue of an order for the examination of Alan Bond pursuant to Section 596B of the Corporations Law be made available to Alan Bond and his legal advisers for the inspection and copying."
This application was heard a few days before 1 July when Mr Bond was to be examined. The parties agreed that, before publishing my reasons, I should hear an appeal by Ms D J Caboche from an order of Judge Bowen Pain dismissing an application to set aside an order for examination of her appeal which raised similar issues. The parties agreed that the examination of Mr Bond should be adjourned to a date to be fixed. The hearing of the appeal by Ms Caboche has been protracted. Hence the delay in publishing these reasons.
The arguments advanced on behalf of Mr Bond fell under several headings. I will deal first with the questions as to service.
Service of the Order of 24 April
In the course of his submissions, Mr Harris contended that the order of 24 April had not been lawfully served because it had not been served pursuant to the Service and Execution of Process Act. That Act itself provides in s8(3) that it is not the only legislative authority for service of a subpoena out of one State and in another. Section 8(3) of the Act is in these terms:
"This Act does not affect the operation of a law of a State so far as the law provides for service of a subpoena on a person: (a) only after permission or leave has been given; or (b) only if it is served not less than a specified number of days, being greater than 14 days, before the date for compliance with the subpoena."
A subpoena is defined in s3 of the Act :
"'subpoena', except in Part 4, means a process that requires a person to do one or both of the following: (a) to give oral evidence before a court, authority or person; (b) to produce a document or thing to a court, authority or person; but does not include a process that requires a person to produce a document in connection with discovery and inspection of documents."
The order made on 24 April 1997 was a subpoena as defined since it required Mr Bond to give oral evidence before the court and did not require him to produce a document in connection with discovery and inspection of documents. The service of this subpoena also satisfied the requirements of s8(3). First, it had been served after a grant of leave to do so. The grant of leave to serve out of South Australia was a valid order made pursuant to Rule 18.07. Secondly, it was served on 29 April and required Mr Bond to comply with it on 22 May. It therefore allowed more than 14 days for compliance. For these reasons, the order made on 24 April 1997 was a subpoena which could be lawfully served other than in accordance with the Service and Execution of Process Act.
However, the subpoena alone was not sufficient process to require Mr Bond to attend the examination. Where an order has been made pursuant to s596A or s596B requiring a person to attend for examination and that person is a prisoner, it is necessary for the liquidator to take a further step in order that the prisoner may be available for examination. Had Mr Bond been a prisoner in South Australia, the liquidator would have to apply for an order pursuant to s117 of the Supreme Court Act. The order is in the nature of the old writ of habeas corpus ad testificandum. The procedure for such an application is provided in Rule 99.08. See also s28 of the CorrectionalServices Act 1982. It seems that a like procedure in Western Australia is provided in s22 of the Prisons Act of that State. Alternatively, the liquidator could proceed under the Service and Execution of Process Act. There is no reason why the failure of the liquidator to obtain an order under s22 of the Prisons Act should affect the validity of the service of the order made on 24 April 1997. The only consequence of the failure to obtain such an order is that Mr Bond was not present at the time and place appointed for the examination. The order and summons for the examination was validly made under the Corporations Law and service of that order was validly made. The failure to obtain the order to produce Mr Bond as a prisoner has no greater consequence than that effect could not be given to the order for examination unless and until such an order was obtained. The order and summons made on 24 April was, therefore, valid notwithstanding the failure to obtain an order under s22 of the Prisons Act.
A Lawful Subpoena?
Mr Harris then submitted that the liquidator had not complied with the relevant provisions of the Service and Execution of Process Act after obtaining the orders on 26 and 27 May. Thus, he said, the liquidator could not require Mr Bond to come to Adelaide. The issue was whether the liquidator has complied with s40 of the Service and Execution of Process Act by serving a subpoena on Mr Bond. Part 3 of the Act provides a procedure for the service of subpoenas. Division 2 of Part 3 provides, among other things, for service of subpoenas addressed to a prisoner in a State other than the State of issue who is required to attend before a court in answer to a subpoena: s38. For present purposes, the relevant provisions of Division 2 are:
"39(1) The court of issue or the authority of issue may order that the prisoner be produced at the time and place specified in the subpoena as the time and place at which compliance with the subpoena is required. (2) The court or authority may make an order only if it is satisfied that: (a) the giving of the evidence that the prisoner is likely to give, or the production of a document or thing specified in the subpoena, is necessary in the interests of justice; and (b) there will be enough time: (i) for compliance with the order; and (ii) to permit the making of applications under sections 43 and 44. (3) Before making an order the court or authority may: (a) require the person (if any) at whose request the subpoena was issued to give such security as the court or authority specifies for ensuring compliance with an order under section 45; and (b) stay the proceeding for the making of the order until the security is givne. (4) An order: (a) may be made subject to specified conditions; and (b) must be addressed to the custodian of the prisoner... 40 (1) Subject to any conditions specified under paragraph 39(4)(a), the order for production and the subpoena, or a copy of both the order and the subpoena, must be served on the custodian of the prisoner, together with a copy, or a further copy, of both the order and the subpoena for service on the prisoner. (2) Service of the order for production and subpoena must be effected in the same way as service of a subpoena in the place of issue. (3) Service of the order for production and subpoena is effective only if the subpoena contains an address for service of the person (if any) at whose request the subpoena was issued. (4) The custodian, or, if more than one person is the custodian of the prisoner, any such custodian, must comply with the order for production even if that custodian; (a) is not the person named in the order as the custodian of the prisoner; or (b) is not the custodian who was served with the order for production and subpoena. 41 Service of the subpoena is effective only if copies of such notices as are prescribed are attached to the subpoena, or copy of the subpoena, served."
The order for production of Mr Bond is the order made on 27 May 1997. It is addressed to the custodian of Mr Bond: see paragraph 2 of the order. There was no issue that the order complies with the requirements of s39 or otherwise as to the validity of the order. It was also common ground that the notice required by s41 was served. Section 42 of the Act provides that service of the order for production of a prisoner is effective only if the expenses therein provided for are paid. There is no issue between the parties under s42.
Section 40 requires three documents to be served on a prisoner and his custodian, namely, the order for production of the prisoner, the subpoena, and the notice under s41. Section 40(1) provides that the documents should be served together. Three documents were served on Mr Bond on 1 June. They were the two orders of 26 and 27 May and the notice under s41. As just mentioned, there is no dispute that an order for production under s39 (the order made on 27 May) and the s41 notice were served. The contest between the parties is that a subpoena was not served. Mr Harris submits that the order made on 26 May 1997 is not a subpoena as defined by the Service and Execution of Process Act. He does not point to any other failure to comply with s40.
The order made on 26 May revokes that part of the order made on 24 April 1997 ordering that the examination take place at the Karnet Prison Farm and in lieu thereof orders that it take place at Adelaide. Paragraph 2 clearly states the time and place of the adjourned examination and requires Mr Bond to attend. Although it does not adhere in every respect to the form of Form 10 of the Corporations Rules, it is in substantial conformity with it. Although there is an obvious advantage in adhering to a prescribed form, a deviation from that form does not lead to invalidity if the deviation is not calculated to mislead: see s25 of the Acts Interpretation Act 1915. The subpoena is not to be read in a factual vacuum. One of the objectives of a subpoena is to give the person served reasonable notice that he is required to attend to give evidence. The question of what the subpoena means is to be determined objectively, that is to say, the question is what would a reasonable person with the knowledge of the surrounding circumstances have understood the document to mean had he been served with it: c.f. Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 2 WLR 945 per Lord Steyn at 961-962, per Lord Hoffmann at 973. A fair reading of paragraph 2 of the order of 26 May makes it quite clear what the person served with that order must do. He is required to attend at this Court in the Sir Samuel Way Building at 9.30am on 1 July 1997 for further examination and remain until the examination has been completed. In other words, the order requires Mr Bond to give evidence before this Court at a nominated time and place. The order, therefore, entirely satisfies the definition of a subpoena in s3 of the Service and Execution of Process Act. It would represent a triumph of form over substance to conclude that the order of 26 May was not a subpoena.
The fact that the order refers to "the adjourned examination" only serves to reinforce the conclusions that the order is a subpoena. As already mentioned, the order and summons made on 24 April 1997 was a subpoena, which had been lawfully served. Mr Bond knew that the examination was appointed for 22 May. He failed to attend because no order for his production had been made. He knew that the examination had been adjourned. He could not be in any doubt as to the purpose and intent of paragraph 2 of the order of 26 May.
An Abuse of Process?
Mr Harris next submitted that the order of 26 May was an abuse of process for two reasons. The first was that the liquidator had obtained the order while the application under s22 of the Prisons Act (WA) was part heard and adjourned before Justice Heenan. The second was that the liquidator intended to the examination for an improper purpose. I turn first to the question whether it was an abuse of process for the liquidator to obtain the order while the application under s22 of the Prisons Act was part heard before Heenan J.
The court has power to stay civil proceedings as an abuse of process where the proceedings are bought for the purpose of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law allows. But there are limits to the concept of abuse of process. A party might have an ultimate purpose which might go beyond the scope of the legal proceedings he has instituted. But the existence of an ultimate purpose does not constitute an abuse of process when that purpose is to prosecute the proceedings to a conclusion or to bring about a result for which the law provides in the event that the proceedings terminate in the plaintiff's favour. These principles are expressed in the majority decision in Williams v Spautz (1992) 174 CLR 509 at 526-527 and in the cases there cited. It follows that, if a plaintiff has a prima facie case against a defendant but has no intention of prosecuting the proceedings to a conclusion because the plaintiff wishes to use them only as a means of extorting a pecuniary benefit from the defendant, the court may stay the proceedings as an abuse of process: Williams v Spautz at 522. If, however, the process is used for the very purpose for which it was designed, there is no abuse of process: Williams v Spautz at 527. The onus of satisfying the court that there is an abuse of process lies upon the party alleging it and he must establish that the improper purpose is the predominant purpose: Williams v Spautz (supra) at 529. In Sherlock v Permanent Trustee Australia Ltd (1994) 22 ACSR 16, 44 it was suggested that it was sufficient to show that the improper purpose is the sole purpose. It is unnecessary in this application to decide which is the correct test. I deal with this application applying the predominant purpose test.
Mr Harris called in aid the decision of Lander J in Simionato and Farrugia v Macks (1995) 19 ACSR 34. In that case Lander J held that it was an abuse of process for a liquidator to apply to the court for an order for examination whilst an order for examination already existed and that order was subject to appeal. In that case the effect of the application and the order was to render nugatory an appeal which had not been heard. However, the circumstances of this case are quite different from those which Lander J had to consider and the decision is distinguishable.
Master Bowen Pain had held that it was appropriate to summons Mr Bond for examination and he made an order to that effect. He then had to decide where the examination should be held. While that question was an important one, it was nevertheless ancillary to the question whether Mr Bond should be examined. In other words, the substantive issue was whether an examination should be held. The order as to the place and time of the examination was made to provide the means to effect the purpose of conducting the examination. The Master first ordered that the examination should be conducted at Karnet Prison Farm. He had jurisdiction to make that order. Once Mr Howard QC had raised the objections to the examination proceeding on 22 May at Karnet Prison Farm and the examination had been adjourned, the Master believed that the better course was to order his examination to be held in Adelaide and so avoid all potential procedural difficulties. The liquidator had a similar view. The orders made on 26 and 27 May 1997 were in that sense ancillary to the order made on 24 April 1997. The order of 26 May revoked paragraph 5 of the order of 24 April directing that the examination take place at Karnet Prison Farm and then ordered that the examination take place at Adelaide. It was then necessary to make an order that Mr Bond be produced from prison for examination. Hence, the order of 27 May.
By seeking these orders, the liquidator must be deemed to have abandoned his present intention that the examination be conducted in Western Australia. The consequence of the order of 26 May is that paragraph 5 of the order made on 24 April that the examination be held at the Karnet Prison Farm has no further force or effect. As there is now no order that the examination be conducted at the Karnet Prison Farm, the liquidator cannot now prosecute the application under s22 of the Prison Act (WA). There is, in short, no factual premise for that application. The fact that the liquidator has, for the time being at least, put out of his hands the ability to prosecute the application under s22 may have implications in costs. Mr Bond might apply to this court for an order as to costs thrown away by the abortive proceedings on 22 May which order may include the costs of the application under s22 of the Prisons Act (WA). But, whatever the costs implications might be, for present purposes, the only relevant consequence of the order of 26 May is to alter the place where the examination is to be held. Mr Bond is not being put to any expense in coming to Adelaide. The liquidator must meet those costs and expenses. Mr Bond is presently in custody at a low security prison farm in Western Australia. Whatever differences might exist between the accommodation for prisoners at Karnet Prison Farm and wherever Mr Bond will be housed in Adelaide are not relevant matters. As a convicted person, Mr Bond must accept whatever accommodation is available to him in Adelaide.
In short, the order that Mr Bond be examined stands. That aspect of the order was not challenged by Mr Howard on 22 May. The Master has made an order that the examination should be held in Adelaide and not at the Karnet Prison Farm. Any rights as to costs available to Mr Bond are preserved. Mr Bond is required to travel to Adelaide but he incurs no expense in doing so. The fact that the liquidator might have acceded to the Master's suggestion that the examination take place in Adelaide in order to avoid whatever other procedural difficulties might be occasioned by the examination taking place in Western Australia does not constitute an abuse of process. A party is at liberty to alter an intended course of action in order to avoid objections raised by his opponent. The liquidator is doing no more than exercising rights which are available to him to meet objections raised by Mr Bond's legal representatives. He is not obtaining a collateral advantage for which the proceedings were not designed. The change of venue for the examination is not an abuse of process.
An Improper Purpose?
I turn to the submission that the liquidator was guilty of an abuse of process in that he was using the examinations for an improper purpose. According to Mr Harris, there were two aspects of the improper purpose. The first was that the liquidator was using the examination to gain a forensic advantage for which the procedure was not designed in that the order for examination had been obtained to further the interests of the liquidator and SECL in Action No 113 of 1996. While the mere fact that Action No 113 of 1996 had been instituted did not, he said, standing alone, constitute an improper purpose, the statement of claim was so substantial and the allegations against Mr Bond were so well particularised that the liquidator could have no purpose for this examination other than to engage in a dress rehearsal of the cross-examination of Mr Bond or to seek to destroy his credit. For that reason, he said, the liquidator had sought the order for examination for an improper purpose. The second improper purpose was that the order for examination was sought in order to benefit BCPL, one of the plaintiffs in Action No 113 of 1996. He further submitted that the interests of justice required that an order should be made permitting Mr Bond to be able to examine the affidavit relied on by the Master when ordering the examination. The court should, he said, give Mr Bond an opportunity to examine the affidavits and then reconvene the hearing of this application.
The Relevant Principles
The power to make an order under s596B is discretionary and the factors relevant to the exercise of the discretion have been examined in a number of decisions concerning s596B and its legislative predecessors. Not infrequently, applications by liquidators for an order for examination are made in circumstances where litigation is intended or pending. It is well-settled that the fact that the liquidator seeks to use the examination to gather information in relation to proceedings which he intends to institute or which has already instituted does not, standing alone, constitute an abuse of process: Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWR 582; Re John Arnold's Surf Shop Pty Ltd (in liq) (1979) 23 SASR 222, 227; Re Rothwells Ltd (No 2) (1989) 7 ACLC 576, 587-589; Hamilton v Oades (1989) 166 CLR 486, 496-498; Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, 518-520; Gerah Imports Pty Ltd v The Duke Group Ltd (in liq) (1993) 61 SASR
557, 564-565; re The Duke Group Ltd (in liq) (1994) 119 ALR 401, 404; Sherlock v Permanent Trustee Australia Ltd (supra) at 47; Adler v Quintex (1996) 22 ACSR 446, 449. As Gleeson CJ observed in Hong Kong Bank of Australia Ltd v Murphy (supra) at 519:
"the possibility that a forensic advantage will be gained does not mean that the making of an order will not advance a purpose intended to be secured by the legislation."
Mahoney P observed in Sherlock v Permanent Trustee Australia Ltd (supra) at 17 that there is a strong public interest in ensuring that the facts relating to public companies to which liquidators have been appointed are made clear so that these provisions are not to be narrowly construed.
It is recognised that s596 creates a tension between competing public and private interests. In Hamilton v Oades (supra) at 496-497, Mason CJ identified two important public purposes. One was to enable the liquidator to gather information which will assist him in the winding-up and thereby assist creditors. The other was to enable evidence and information to be obtained to support the bringing of criminal charges in connection with the company's affairs. On the other hand, the court must take into account the interests of the witness. When balancing these competing interests, regard must be had to the fact that the s596 gives a liquidator rights not possessed by other litigants: Hamilton v Oades (supra) at 497 and the procedure is designed to provide evidence in the form of admissions: Re Hugh J Roberts Pty Ltd (in liq) (supra) at 585; Hamilton v Oades (supra) at 496; Adler v Quintex Group Management Services Pty Ltd (in liq) (supra) at 449. The process of obtaining information will enable the liquidator to decide whether to continue proceedings already commenced and assess the prospects of success: Re Hugh J Roberts (supra) at 585; Re Spedley Securities Limited (1990) 8 ACLC 669 at 676; Joye v Beach Petroleum NL (1996) 137 ALR 506 at 518; Re The Duke Group Limited (In Liquidation) 119 ALR 401 at 404; Gerah Imports (supra) at 564. Often the gathering of information quite properly involves testing the reliability or credit of the examinee from whom the information is being obtained: Re Hugh J Roberts at 585; Re Spedley Securities at 677; Hong Kong Bank of Australia Ltd v Murphy at 519. It is a legitimate purpose for the liquidator to seek information to identify and test a defence or likely defence to be raised by an examinee: Hamilton v Oades at 497; Sherlock v Permanent Trustee Australia Ltd (1996) 22 ACSR 16 at 47. Whether there will be, in a particular case, a use of process or an abuse of it will depend upon purpose rather than result: Re Excel Finance Ltd (supra) at 91.
In Re Rothwells Ltd (No 2) (supra) at 587-589 Nicholson J summarised the propositions established by the cases. I respectfully adopt them and refer in particular to his propositions 6, 7, and 8. I omit His Honour's citations of authority.
"6. The section will be misused where examination is sought: (a) to surmount a failure by the liquidator as litigant; for example, as a means to overcome refusal to answer interrogatories or refusal of leave to administer interrogatories. (b) to examine prospective or existing defendants' probable witnesses simply for the purpose of destroying their credibility, although very often the gathering of information may quite properly involve testing the reliability or credit of the examinee from whom the information is being obtained. The basic rule is that the liquidator is not entitled to have a dress rehearsal of the cross-examination in the action.
7. The section will not be misused where examination leads to: (a) questions of a fishing nature; (b) a liquidator obtaining admissions or material that are available for him to use in evidence in current proceedings. The section gives to a liquidator in the interest of creditors an advantage denied to the ordinary litigant; the activities of the liquidator qua litigant are naturally and unavoidably the proper activities of the liquidator qua liquidator.
8. The oppression or unfairness may appear at the time the application is first made for the exercise of the discretion or at any subsequent point of time. It follows that even if the discretion is exercised in favour of an examination taking place the examining judge or master may hear objections to any particular questions (and if an examinee is unrepresented may intervene) where the examination departs into a field which is abusive of the process of the court."
In order to advance his submissions, Mr Harris also sought access to the confidential affidavits filed in support of the order for examination. I deal with that application, before examining the submissions as to improper purpose.
Inspection of Confidential Affidavit
The order of 24 April recites that it was made "upon reading the affidavit filed herein". The deponent of the affidavit is not named. On 24 April 1997 an order was made that an affidavit of the liquidator sworn on 23 April 1997 be placed in a sealed envelope and not be disclosed to any person other than the liquidator and this court. I do not know who is the deponent. I have not been asked to examine the affidavit and I have not done so. The parties are aware from other proceedings that the liquidator has also sworn an affidavit on 7 December 1995 which was filed in support of orders for examination of a number of persons including Mr Bond. I have not been asked to examine that affidavit.
The court has a discretion to order disclosure of the materials which were relied upon by the liquidator when seeking the order for the examination. The factors relevant to the exercise of that discretion have been examined in Re British and Commonwealth Holdings PLC (Nos 1 and 2) [1992] Ch 342 at 355 and 367 and by the Full Court of the Federal Court of Australia in Re Excel Finance Corporation Ltd (Receiver and Manager appointed); Worthley v England
(1994) 52 FCR 69 at 93-94. It is convenient to quote from the observations in the later decision:
"In our view the Court has a discretion to order the disclosure, to a prospective examinee, of material lodged in support of the application for an examination order and should do so where the justice of the case so requires: cf Re British and Commonwealth Holdings Plc (Nos 1 and 2) [1992] Ch 342 at 355 per Nourse L J and at 367 per Ralph Gibson LJ.
It does not follow that the Court would permit every examinee or potential examinee to have access to such material. There are sound reasons why inspection should not be freely granted for so to do could afford to an examinee information which could permit the examination process to be frustrated: cf per Sir George Jessel MR in Re Gold Co (supra). There could also be confidential information which should properly be withheld. However, we agree with Nourse LJ in Re British and Commonwealth Holdings Plc (at 355):
'... inspection of the statement should prima facie be allowed where the court is of the opinion that it will or may be unable fairly and properly to dispose of the application if part of the evidence is withheld from the person against whom the order is sought. It will then be for the officeholder to satisfy the court that confidentiality in whole or in part is nevertheless appropriate.'
An applicant will not be permitted access to such material to enable him or her to "fish" for a case. There must be material before the Court from which it appears that the applicant has an arguable case, to which the material is relevant, before the discretion should be exercised in favour of that applicant. But once that appears the discretion will normally be exercised in favour of the application."
If he is to be permitted to have access to the materials relied on by the liquidator, Mr Bond must demonstrate that he has an arguable case that the liquidator seeks the examination for an improper purpose and the affidavit is relevant to that case. The question is whether it is possible fairly and properly to dispose of this application without access to it.
The alleged improper purpose is said to lie in the fact that the allegations against Mr Bond are so detailed that the liquidator could have no purpose other than to rehearse a cross-examination of Mr Bond in Action No 113 of 1996 or seek to destroy his credit. But the submission fails to give due weight to the position Mr Bond formerly occupied in SECL (then called "Bond Corporation Holdings Ltd") immediately prior to crash of the Bond group of companies. As an executive director and chairman of director of SECL, Mr Bond would have taken part in the management of SECL. It is very likely that, as a former executive director, he had a good knowledge of the affairs of the company and would be in a position to throw a good deal of light on a number, if not many, aspects of the management of the company and the manner in which it dealt with its assets.
The liquidator is entitled to examine Mr Bond in order to seek admissions. He is entitled to ask questions of a fishing nature. He is entitled to seek information for the purpose of assessing whether he should continue to prosecute Action No 113 of 1996. Even if it is assumed that the examination is for the predominant purpose of eliciting evidence which may assist in the prosecution of the Action No 113 of 1996, the liquidator is entitled to ascertain whatever information is available from Mr Bond. That is a purpose for which examinations have been traditionally conducted. He may also seek to obtain from Mr Bond evidence concerning the allegations against the other defendants in this action. Given Mr Bond's position and his involvement in the affairs of SECL as an executive director and chairman of directors, it is extremely likely that Mr Bond would have a good deal of knowledge about the acquisition by the plaintiff companies of the paintings the subject of the Action No 113 of 1996 and the dealings in them. Mr Bond was not a stranger or a person standing at the periphery of SECL. He had a direct and immediate involvement in its affairs. He was not a lowly officer or employee of SECL. He was its chairman of directors. It will plainly assist the winding up of SECL to ascertain if these paintings are assets of SECL, to ascertain whether there were dealings in them and, if so, the facts concerning those dealings, and to ascertain if the dealings in them were fraudulent. The liquidator is, therefore, entitled to ascertain what Mr Bond knows about these paintings, assets of SECL said to be worth some $6,000,000, and what Mr Bond knows about any dealings in them and to seek to ascertain information as to whether they have been wrongly disposed of to the financial detriment of SECL. Information of this kind will assist the liquidator to decide whether to continue to seek to prosecute the action in the interests of the creditors of SECL. Notwithstanding that the statement of claim contains detailed allegations, the liquidator is entitled to make inquiries to assess his capacity to prove those allegations provided that he stops short of a rehearsal of cross-examination or an attempt to destroy the credit of Mr Bond.
No evidence has been adduced on behalf of Mr Bond in support of his application to examine the affidavits. His case is grounded on the fact of the Action No 113 of 1996, the detailed nature of the allegations in the statement of claim, and the position of BCPL. Given Mr Bond's position in SECL and the knowledge he is likely to have, there is a great deal of territory which can be explored before the stage would be reached of a rehearsal of cross-examination or an attempt to destroy his credit. Mr Bond falls well short of establishing that he has an arguable case. It has been held that it is incumbent upon an examinee to adduce further evidence if that person is to impugn successfully the validity of the examination order, particularly as to any discretionary elements: Re Stirling Henry Ltd (1972) 1 NSWLR 497 at 501 to 502, 503; Shapowloff v Stirling Henry Ltd (1972) 2 NSWLR 691; Gerah Imports at 565. Reliance on this principle would not assist Mr Bond but it is unnecessary to resort to this principle as Mr Bond falls so far short of demonstrating an arguable case or showing that the affidavit material might be relevant.
For like reasons, Mr Bond has failed to show that the examination is to be conducted for an improper purpose or that it will constitute an abuse of process. If questions are asked which constitute a dress rehearsal of cross-examination or which are an attempt to destroy Mr Bond's credit, counsel for Mr Bond can object to them and the examining Master can rule on their admissibility in the light of well established principles: see proposition 8 in Rothwells Ltd (No 2) (supra); Hamilton v Oades (supra) at 498-499. It is not for this court to seek to anticipate the nature of the questions to be asked in the course of the examination or to predict the type of questions to which objection might be taken: c.f. Hamilton v Oades (supra) at 499; Geroff v Thomas (unreported, Court of Appeal Queensland, 14 October 1994). The court is able to restrain questions should the examination depart from a legitimate purpose. The availability of this discretion in the course of the examination is sufficient to satisfy any concerns, whether legitimate or otherwise, the examinee may have. It is clearly established that if, in any particular question, there is some unfairness or something objectionable, the time at which the matter ought to be raised is the time at which the question is asked. See Shapowloff v Stirling Henry Ltd (in liq) [1972] 2 NSWLR 691 and 693; Re Suncoast Tile Merchants Pty Ltd (No 2) (1986) 11 ACLR 52 and 54.
The Position of BCPL
Mr Harris also submitted that the liquidator was using the examination for the improper purpose of assisting BCPL in its capacity as a plaintiff in Action No 113 of 1996.
As already mentioned, BCPL is a wholly owned subsidiary of SECL. Since 5 February 1993 Mr Hoffmann has been a director of BCPL. There are two directors of BCPL. The other director is Mr W J Trenear. Both Mr Hoffmann and Mr Trenear were appointed directors by the liquidator.
The present financial position of BCPL may be summarised in this way:-
(1) BCPL is not in liquidation. (2) Its sole shareholder is SECL. (3) It has an excess of liabilities over assets in about $10,000,000. (4) Its only unsecured creditor is SECL. It is liable to SECL in a sum of $50,000. (5) It has secured creditors in the sum of approximately $10,000,000. It is unnecessary to examine the detail of the security held by the secured creditors and their capacity to recover what is due to them. It is sufficient to note that the secured creditors have security over a receivable to which BCPL is entitled in what is called the Bond/Connell joint venture. The only remaining asset of that joint venture is a large parcel of land at Brigadoon, some 25 minutes from Perth. The only asset to which the secured creditors have recourse is the interest of BCPL in that land. The land has been sold and it was intended that the settlement take place in Perth on 27 June 1997. The recovery of BCPL's receivable from the Bond/Connell joint venture is uncertain because of disputes between the former joint venture partners. Those disputes will be resolved following an accounting of the respective interests of the partners in the joint venture under the supervision of the Supreme Court of Western Australia. (6) Mr Hoffmann has no beneficial interest in the affairs or assets of BCPL. (7) Since their appointment in February 1993 Mr Trenear and Mr Hoffmann have to all intents and purposes acted as quasi-administrators of BCPL. They have continued to act as directors of BCPL at the request of the liquidator of SECL and the secured creditors of BCPL because they have a working knowledge of the extensive and complicated affairs of the Bond/Connell joint venture and the likely prohibited costs of formerly appointing an external administrator. (8) BCPL has granted charges to a number of third parties. I accept Mr Hoffmann's evidence that most of those charges are recorded as having been removed; that there is a small number which have not been recorded as having been removed; that in the case of those charges not been removed the indebtedness secured by those charges has been extinguished.
(9) BCPL is neither a creditor nor contributory of SECL.
The annual return of BCPL for 1995 incorporated the audited accounts of BCPL for the year ending 31 December 1995. Those accounts record an indebtedness to the secured creditors in the sum of $17,145,828. The reduction of the amount due to the secured creditors is a consequence of writing back approximately $7,000,000 on 31 December 1996. This write back of interest was based on legal advice received by BCPL to the effect that pursuant to the loan agreement BCPL was liable to only pay interest on the loan agreement until 31 December 1993. BCPL had previously been recording interest as being incurred on an annual basis. Even if the company is in error in writing back the interest, the secured creditors do not have recourse to any assets other than what might be recovered on the BCPL receivable from the Bond/Connell joint venture.
The accounts for BCPL for the period ended 31 December 1995 also record that the total sum due to unsecured creditors was $334,031. In early 1996 the liability to BCPL to many of its unsecured creditors became statute barred. In October 1996 SECL and BCPL compromised an action between them. In consequence the only unsecured creditor is BCPL is SECL and the amount due to SECL is $50,000.
As a wholly owned subsidiary of SECL, BCPL is an asset of SECL and is capable of producing dividends to SECL. Whatever benefit SECL obtains from this examination has a potential to improve the value of BCPL as an asset to SECL. More directly, SECL has the asset of the $50,000 debt due to it by BCPL. BCPL's only unsecured creditor is SECL. Even if there were other unsecured creditors, the evidence suggests that the amount due to them will not be substantial so that the value of BCPL as an asset to SECL will nevertheless be enhanced. The evidence also indicates that the secured creditors of BCPL will not be able to have recourse to any sum recovered by BCPL in this action.
As already mentioned, the onus of satisfying the court that there is an abuse of process lies upon the party alleging it and he must establish that the improper purpose is the predominant purpose: Williams v Spautz (supra) at 529.
The power to order an examination may be exercised for the benefit of the corporation or its shareholders generally and for its creditors generally: Re BPTC Ltd (1992) 10 ACLC 271; Re Laurie Cottier Productions (in liq) (1992) 9 ASCR 513; Re Excel Finance Ltd; Worthley v England (1994) 52 FCR 69 at 91-93. It is not necessarily an improper purpose to use the examination procedure to aid a creditor, even a secured creditor, to recover a debt where there is also a benefit to the liquidator: Re Excel Finance Ltd at 92-93. The court will examine all relevant matters to determine whether the principal purpose is to further the cause of the creditor and the examination is not for the benefit of the corporation, its contributories or creditors (other than in a most indirect way): Re Excel Finance Ltd at 93. It has been said that, in consequence of the amendments in 1992 to the Corporations Law, the scope of examinations is wider and ought not be limited to by reference to the benefit of the company, its creditors or contributories: Flanders v Beatty (1985) 16 ACSR 324, 335. But it is unnecessary, in this case to examine the width of the power to order the examination.
An examination of the relevant circumstances shows that there are several reasons for rejecting these submissions. The first is that an examination of the statement of claim in Action No 113 of 1996 shows that the claim is in substance being prosecuted on behalf of SECL. The statement of claim alleges that SECL owned the paintings. BCPL has been joined because it was the agent of SECL and because the paintings were recorded in the fixed asset depreciation schedule of fixtures and fittings of BCPL for the year ended 30 June 1989. The purpose of the action is to recover the art works for SECL and, failing that, to recover damages to be paid to SECL. It is reasonable to infer that, if any damages are payable to BCPL, the liquidator will require BCPL to pay the amount recovered to SECL. It is apparent that the predominant purpose of the examination is to assist SECL. To the extent that information gained at the examination might benefit BCPL, that information will, incidentally assist BCPL in its role as a co-plaintiff with SECL. It will not assist it in any other respect. In any event, the benefit to BCPL must be quite minimal when compared to the benefit to SECL. At all times, therefore, the predominant purpose of the examination continues to be to gain information for SECL.
Secondly, it is apparent that the liquidator who controls BCPL has joined BCPL in the Action No 113 of 1996 in order to assist SECL in its objective of recovering the paintings or, in their stead, damages. The proceeds of the action will benefit the creditors of SECL. In my view, a liquidator is at liberty to disclose to a co-plaintiff, whose interests are closely aligned with his, information which he has discovered in the course of an examination for the purpose of enabling the better prosecution of an action which has been instituted with the intention of benefiting the interests of the creditors of the corporation in liquidation. The liquidator is, therefore, entitled to make available to BCPL the information he gains in the course of this examination so that BCPL is the better equipped to prosecute the action and to assess its prospects of success.
Thirdly, s597(14A) of the Corporation Law enables a written record of an examination to be inspected by any person on paying the prescribed fee. Section 597(14A) provides:
"A written record made under subsection (13): (a) is to be open for inspection, without fee, by: (i) the person who applied for the examination; or (ii) an officer of the corporation; or (iii) a creditor of the corporation; and (b) is to be open for inspection by anyone else on paying the prescribed fee."
There is no order which prevents BCPL from inspecting the transcript. BCPL is therefore at liberty to pay the fee and inspect the transcript. Disclosure to BCPL is, therefore, not improper. Fourthly, the transcript of the examination would be a discoverable document in the Action No 113 of 1996. Thus, there are two means by which BCPL would be entitled to gain access to the transcript and learn what had occurred at the examination. In addition, it is likely that documents produced at the examination would be discoverable in the Action No 113 of 1996.
For these reasons, an intention to disclose the information to BCPL does not constitute an improper purpose. It was faintly argued by Mr Harris that disclosure by the liquidator to BCPL would be contrary to the orders as to confidentiality made in respect of these examinations. That submission must fail. The orders for confidentiality do not in any respect bind the liquidator.
For all of these reasons, Mr Bond has not in any respect discharged the onus upon him to justify an order giving him access to the material filed in support of the applications for the orders for examination. Further, there is no improper purpose on the part of the liquidator in conducting the examination of Mr Bond.
Material Non Disclosure?
As is contemplated by s596C, the orders for examination of Mr Bond were made on an ex parte application. Generally speaking, as with any other ex parte application, the liquidator is obliged to make full disclosure of all relevant circumstances and particularly those which are adverse to the application: Re Imperial Continental Water Corporation (1886) 38 Ch.D. 314 at 317 approved in Hong Kong Bank of Australia Ltd v Murphy (supra) at 520. Whatever the liquidator's purpose in conducting the examination, it was incumbent on him to disclose the fact that Action No 113 of 1996 had been instituted, to name the parties to that action, and to outline the allegations made in the action. For the reasons already given, the fact of that action was a matter which would need to be considered by the Master in the exercise of his discretion to order the examination. What Mr Harris criticises is the fact that the disclosure was not made in an affidavit. He properly points to the fact that the appropriate method of disclosure is by affidavit so that parties can be aware of what has been disclosed. While that should be the practice as a general rule, I do not think that the fact that this information was disclosed from the bar table and not by affidavit has any consequence in these proceedings. If Mr Hoffmann had disclosed this fact in an affidavit, it would have been necessary for him to do no more than state the fact that the action had been instituted, to name the parties and briefly to outline the allegations. The statement of claim was available in the court, albeit subject to an order as to confidentiality. If he considered it necessary, Master Bowen Pain could have applied for an order that he be permitted to examine the statement of claim and the order would undoubtedly have been made. In all likelihood, as a judicial officer of the court, he did not require leave to examine it. In short, disclosure in an affidavit would have achieved no more than disclosure from the bar table. There was not in any sense a material a non-disclosure.
Mr M C J Hoffmann is a member of the firm of Fisher Jeffries, solicitors for the liquidator and solicitors for the plaintiffs in Action No 113 of 1996. Since 5 February 1993, he has been a director of BCPL. The Master was not told that Mr Hoffmann was a director of BCPL. It was first brought to the attention of the court in the affidavits filed in respect of this application. Mr Harris asserts that the liquidator had a duty to disclose that Mr Hoffmann is a director of BCPL. This submission must also fail. Mr Hoffmann's directorship is quite immaterial to the order for examination. The fact that BCPL was a plaintiff was disclosed. It was immediately apparent that Mr Hoffmann is a member of the firm acting for both SECL and BCPL in the action. His knowledge as solicitor of what would be gleaned in the examination was, therefore, available to both companies quite independently of his directorship of BCPL. Further, for the reasons already given, there is no impropriety in BCPL having access to the information obtained at the examination. There was no obligation to disclose the directorship. Even if there were, the non-disclosure is not material given Mr Hoffmann's role as solicitor of both SECL and BCPL.
Even if I had held that Mr Hoffmann should have disclosed his directorship, that non-disclosure, viewed alone or when considered with other facts, does not lead to the conclusion either that Mr Bond has discharged the onus upon him to obtain an order for access to the affidavits or that he has demonstrated in any respect that the liquidator intends to use the examination for an improper purpose.
Delay in Raising Improper Purpose
I have dealt with the submissions that the liquidator has an improper purpose on the merits and without any regard to the delay in making the application. For the reasons which follow, the application to set aside the order of 24 April on the ground that the liquidator is using the examination for improper purpose fails because it is out of time.
Paragraph 7 of the order made on 24 April allowed seven days from the date of service in which to apply to vary or discharge the order. Although the order did not state it, that is the effect of Rule 50 of the Corporations Rules. No application to vary or discharge the order or to set aside it was made within seven days of service on 29 April. Given that the summons and statement of claim were not served on Mr Bond until 5 May, it might have been reasonable, in all the circumstances, to have extended the time within which to make the application until 22 May, when the examination was called on at the Karnet Prison Farm. But, although counsel for Mr Bond raised a number of objections to prevent the examination proceeding, there was no challenge to the making of the order on 24 April, or to its validity, or to the validity of the service of the order. Further, Mr Harris was present at the hearings on 26 and 27 May. Although he expressly reserved his position in respect of the capacity of the court to compel Mr Bond to come to Adelaide, he did not generally reserve his position or give any hint that an application be made to set aside the order of 24 April. The application to set aside the order was not made until 6 June. As the application was made out of time is there any justification for extending time until 6 June?
Mr Bond has the benefit of advice from a team comprising senior and junior counsel and a solicitor. The summons and statement of claim in Action No 113 of 1996 had been served on 5 May, some seventeen days before the examination on 22 May. The order of summons for examination had been served on 29 April, twenty two days before the examination. There was sufficient time, if not ample, available in which to consider what, if any, objections would be made to the examination and to consider whether to seek to set the orders aside. No satisfactory reason has been advanced to explain the delay or to justify extending the time within which to make the application. The application is out of time and I do not extend the time within which to make it.
There is a further factor which leads to the conclusion not to extend time. It is not proper to attempt to defeat an order for examination on one ground and, if that application fails, then to advance another objection to the examination. A party seeking to prevent an examination must give notice at the one time of all grounds on which he seeks to set aside or stay the order for examination. If the position is otherwise, the party opposing the order for examination can delay and obstruct with successive applications, each on different grounds but all seeking the one objective of preventing the examination. The principle in Henderson v Henderson (1843) 3 Hare at 115, 67 E.R. at 319 as approved in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 is relevant in this context. To restate the relevant passage from in Henderson v Henderson is to demonstrate the force of the principle in the particular circumstances of this case:
"where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The pleas of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."
Counsel for Mr Bond have not pointed to any special circumstances. Thus, while I have dismissed on the merits the application to set aside the order for examination on the ground of improper purpose, the failure to make the application by at least 22 May is a further ground on which to dismiss the application. The only special circumstances which obtained related to the orders made on 26 and 27 May, after the hearing on 22 May.
Conclusion
Mr Bond has failed to demonstrate any flaw in the service of the various orders, he has failed to demonstrate any failure to comply with the provisions of the Service and Execution and Process Act, he has failed to demonstrate an abuse of process in any respect, he has failed to satisfy me that he should have access to the materials sworn in support of the application for the orders for examination, and he has failed to demonstrate any material non-disclosure. In short, he has failed to demonstrate why he should be entitled to any of the orders he seeks. When viewed singularly or collectively, the claims made by Mr Bond do not justify an order setting aside the examination. I therefore dismiss each of the applications.
A Subsequent Application
After these reasons had been prepared, I heard the appeal by Ms Caboche. In the course of argument, it became necessary to examine the series of orders leading to the order of 24 April 1997 which she had challenged. In the course of that examination, it became apparent to me that orders had been made for the examination of Mr Bond before the order of 24 April 1997. The first order was made on 8 December 1995. It required Mr Bond to attend for examination on 26 February 1996. On 13 February 1996 an order was made vacating the date for examination. On 18 March 1996, it was ordered that the examination be held on 3 May 1996. On 22 April 1996 the examination was adjourned to 5 August 1996. No further order was made. The order of 8 December 1995 and the variations of that order therefore lapsed. None of these orders had been served on Mr Bond. It is apparent that the substantive order is the order made on 8 December 1995. The other orders do no more than vary the date for the examination. This examination of the orders was, of course, conducted after the argument of this application. In addition, I was invited to examine the liquidator's affidavit sworn on 7 December 1995. As I state in the Caboche judgment, I read that affidavit for the purpose only of determining whether there was a failure to disclose relevant information. It was apparent that Judge Bowen Pain relied on that affidavit when making the order dated 8 December 1995 that Mr Bond attend for examination.
It was, of course, necessary and proper for me to disclose this information to the parties to this application. The matter was called on again on 29 July for that purpose. On 30 July Mr Harris applied to make two amendments. The first was to add the words "on 8 December 1995 and" after the word "made" in the first line of paragraph 3 of Mr Bond's application. The second was to amend paragraph 9 of the application to read:
"That all affidavits filed in support of the liquidator's applications for the issue of an order for the examination of Alan Bond pursuant to Section 596B of the Corporations Law be made available to Alan Bond and his legal advisers for the inspection and copying."
The existence of the earlier orders was not known to Mr Bond nor was there any reason why he or his legal advisers should have been aware of them. It was, therefore, appropriate to allow the amendments, even at this late stage. I made an order allowing the amendments. However, for the reasons which follow, the amendments do not cause me to alter any of the conclusions contained in these reasons.
Mr Whitington submitted that, as the order of 8 December 1995 has lapsed, the court cannot now set it aside. He added that the order made on 24 April 1997 was made on an application made that same day. It was supported by an affidavit. It was, he said, a fresh application and, therefore, the only relevant order was the order of 24 April. Mr Harris replied by submitting that, notwithstanding that the earlier orders had lapsed and the order of 24 April 1997 had been made on a fresh application, that order was no more than a further step in the process of bringing Mr Bond to this court for examination, a process which had begun on 8 December 1995. Thus, he submitted, it was only on 8 December 1995 that Judge Bowen Pain exercised his discretion to grant the application. It was, therefore, necessary to consider the question whether the liquidator then had a settled intention to issue proceedings in what became Action No 113 of 1996 and whether he disclosed that intention. Judge Bowen Pain did not publish reasons for making the order on 24 April 1997. It is impossible to state whether he gave separate consideration to the application and the implications flowing from the issue of Action No 113 of 1996. But, even if it is assumed that he did not, the position of Mr Bond is not advanced. On the invitation of counsel, I examined the liquidator's affidavit of 7 December 1995 only for the purpose for determining whether there had been any material non-disclosure. For the reasons expressed in the Caboche judgment, I find that there was no material non-disclosure.
Even if the only occasion on which Judge Bowen Pain exercised his discretion to order the examination was on 8 December 1995, that fact does not give rise to any new factors which should cause me to alter the conclusions already expressed. I remain of the view that I should dismiss the application even in its amended form that the liquidator is not using the examination for an improper purpose and that Mr Bond is not entitled to examine the affidavits filed in support of the application for examination.
Earlier in these reasons, under the heading "Inspection of Confidential Affidavit", I said that I had not been asked to inspect the affidavits filed in support of the application. I also said that I did not know who had sworn the affidavits. In the course of argument on 29 July, Mr Whitington said that the affidavit in support of the application on 24 April had been sworn by Mr Karas, a solicitor employed by the solicitors for the liquidator, and that affidavit referred to the affidavit of the liquidator sworn on 7 December 1995. I was not then invited to inspect the affidavit of Mr Karas and I have not done so. What Mr Whitington has told me does not add in any material way to what has already been proved. It is apparent from the order of 24 April 1997 that an affidavit had been sworn in support of the application. I had been asked in any event to read the affidavit sworn 7 December 1995. What Mr Whitington has told me does not therefore affect the conclusions I have reached.
For these reasons, I dismiss the amended application and I adhere to my decision to dismiss the main application.
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