Joye, Ian Edward v Cortaus Ltd (in liq)
[1996] FCA 210
•28 MARCH 1996
CATCHWORDS
PRACTICE AND PROCEDURE - Adjournment of motion - proceedings commenced by liquidator - motion by a respondent to those proceedings for security for costs - liquidator's summons for examination of that respondent issued but not heard because respondent overseas and dispute before the Court as to service - motion for security for costs adjourned indefinitely - no real connection to be found between the examination summons and the application for security for costs - respondent entitled to have jurisdiction of the Court to award security for costs exercised.
Re Excel Finance Corporation Ltd, Worthley v England (1994) 52 FCR 69; applied.
Oceanic Sun Line Special Company Inc v Fay (1988) 165 CLR 197; applied.
IAN EDWARD JOYE v CORTAUS LIMITED (In Liquidation)
No SG 41 of 1995
CORAM: SHEPPARD, SPENDER & HILL JJ
PLACE: SYDNEY (Heard in Adelaide)
DATED: 28 MARCH 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 41 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE OF THE
FEDERAL COURT OF AUSTRALIA
BETWEEN:IAN EDWARD JOYE
Appellant
AND:CORTAUS LIMITED (IN LIQUIDATION)
Respondent
CORAM: SHEPPARD, SPENDER & HILL JJ
PLACE: SYDNEY (Heard in Adelaide)
DATED: 28 MARCH 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
The appeal be allowed.
The respondent to pay the appellant's costs of the appeal.
The order of O'Loughlin J of 8 June 1995 adjourning the motion for security for costs should be set aside and in lieu thereof the appellant's motion for security for costs should be fixed for hearing before a judge of this Court.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 41 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE OF THE
FEDERAL COURT OF AUSTRALIA
BETWEEN:IAN EDWARD JOYE
Appellant
AND:CORTAUS LIMITED (IN LIQUIDATION)
Respondent
CORAM: SHEPPARD, SPENDER & HILL JJ
PLACE: SYDNEY (Heard in Adelaide)
DATED: 28 MARCH 1996
REASONS FOR JUDGMENT
THE COURT:
The appellant, Ian Edward Joye, appeals, pursuant to leave granted, from the judgment of a judge of the Court, adjourning indefinitely Mr Joye's motion for security for costs. It is common ground between the parties that the attack on the decision to adjourn is an attack on a matter of practice and procedure, so that the Court would only interfere with the decision of the primary judge if satisfied that the exercise of discretion has miscarried in the sense that there has been some error of principle and the decision appealed from has worked a substantial injustice to one of the parties: House v The King (1936) 55 CLR 499, Squire v Rogers (1979) 27 ALR 330 at 337, Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177-8.
On 1 November 1993 Cortaus Limited ("Cortaus") commenced proceedings against Mr Joye alleging breaches by Mr Joye of the Companies (Acquisition of Shares) Code, as well as breaches by him of fiduciary duties owed to Cortaus and claiming from him and others an amount equal to a profit said to have been made by them. It is unnecessary to detail here the circumstances alleged to give rise to the claim made by Cortaus. Subsequently Cortaus went into liquidation.
On 1 November 1994 the liquidator of Cortaus, Mr Sheahan, applied for the issue of a summons pursuant to the provisions of s569B of the Corporations Law for the examination of Mr Joye. A summons was issued on 6 December 1994. Personal service upon Mr Joye was not effected and on 7 February 1995 an order was made by a Registrar of the Court authorising substituted service upon Mr Joye of the summons. Mr Joye sought review of the Registrar's orders and that application was, in due course, heard by Branson J who dismissed the review in a judgment dated 1 June 1995. The judgment of Branson J is the subject of an appeal to the Full Court of this Court, which appeal was heard concurrently with the present appeal.
In the meantime, on 3 May 1995, Mr Joye filed, in the proceedings brought by Cortaus against him, a motion for security for costs. That motion was returnable on 9 May. On that day the matter was set down for hearing on 30 June, subject to another matter which had been listed for hearing at the same time being vacated. On 2 June 1995 an application was brought on behalf of Cortaus to vacate the hearing scheduled for 30 June and to adjourn the motion for security for costs "to a date to be fixed pending the resolution of all and any appeals from the judgment of Justice Branson...".
That application was heard on 8 June 1995, although by that time it was unlikely that the application for security for costs would be heard at the end of June or indeed at any other time during the course of the year. Nevertheless, the matter was argued and determined on the basis that time would have been available on 30 June to hear the application.
In the result his Honour acceded to the liquidator's request and adjourned the motion for security for costs to a date to be fixed. His Honour did so on the basis that the proceedings against Mr Joye and the examination summons were matters which were "irretrievably interwoven". His Honour saw Mr Joye as being a litigant "in a plurality of positions". Relevantly, one of those positions was as a respondent answering a claim by a company in liquidation. The other was as an interested party whom the liquidator wished to examine and "whose interest is the greater by virtue of him being a litigant in the proceedings". In reaching his conclusion his Honour relied upon the fact that Mr Joye was not presently
within the jurisdiction and an inference that he had no "immediate intention" to return. His Honour said:
"Mr Joye would not have challenged the order for substituted service and would not be appealing the decision of Branson J if he was imminently, or indeed in the foreseeable future, intending to return to the jurisdiction, for if he was he would well know that upon his return, or indeed not long after, he would be served with the section 596B summons. Upon that postulation I therefore have a litigant in the form of Mr Joye who seeks to invoke the court's discretionary powers in his favour by protecting him with an order for security for costs, and yet the same person is absent from the jurisdiction and on my finding not showing any present intention to return."
For these reasons his Honour indicated that it was appropriate to stand over Mr Joye's application for security for costs indefinitely, but with liberty for either party to bring the matter back on seven days' notice. He said that he contemplated that such an application would be made by Mr Joye as soon as he was within the jurisdiction or in a position to inform the Court of his intention to come within the jurisdiction.
It may be noted, as senior counsel for Mr Joye pressed upon us, that there was no finding on the part of his Honour that Mr Joye would stay outside Australia if ultimately it was found on the appeal against the judgment of Branson J that he was bound by the examination summons. Put another way, Mr Joye is not presently in contempt of court nor was there any finding that Mr Joye would commit a contempt if his appeal from the decision of Branson J were dismissed. Secondly, there is no finding nor any suggestion that Mr Joye left Australia for the purpose of avoiding service of the examination summons.
At the heart of his Honour's judgment and the consequent attack upon it, is the position that the proceedings brought by Cortaus against Mr Joye and the examination summons were "irretrievably interwoven". If that proposition is incorrect then, as is accepted on behalf of Cortaus, there has been an error of principle requiring the appeal to be allowed. It goes without saying that to deprive Mr Joye of the ability to have his application for security heard would work a substantial injustice to him.
The purposes for which it is legitimate for a liquidator to examine a person are discussed by the Full Court of this Court in Re Excel Finance Corporation Ltd, Worthley v England (1994) 52 FCR 69 and see too Hamilton v Oades (1989) 166 CLR 486 at 496. As Excel demonstrates, the power to approach the Court for an examination summons must be exercised bona fide and for the purpose for which it was conferred. If that purpose were an improper purpose the Court would act to set aside the summons. Particularly, there will be an abuse of process if the person seeking the examination order has the purpose of obtaining a forensic advantage not otherwise obtainable.
It is conceded by Mr Joye, as indeed it must be, that it would not be an abuse of the process for a liquidator to examine Mr Joye generally as to the affairs of the company, notwithstanding the proceedings extant between Cortaus and Mr Joye. It would not be improper for the liquidator to have as a purpose of the examination a consideration of whether he should proceed with that litigation, notwithstanding that in the result he might obtain evidence which could advance the company's prospects in it. It may well also be an appropriate purpose, related to the last mentioned purpose, to examine Mr Joye as to what assets he may have so as to determine whether it would be fruitful for Cortaus to proceed with the litigation.
However, none of these purposes would seem relevant to the application by Mr Joye for security for costs in the proceedings brought by Cortaus against him. The fact is that that litigation has commenced. Cortaus is not merely a corporate litigant but in addition is in liquidation. The case is one where it might be expected that an application for security for costs would be likely to be successful.
Although the inevitable consequence of the hearing of the application may be the making of an order for security for costs, it does not necessarily follow that the order will be made for the immediate provision of security for the entirety of the costs that the appellant might expect to incur if the matter were to go to a full hearing. A not uncommon practice is to order security in principle and to provide from time to time for the provision of such amounts as are necessary to cover the party's costs up to various stages of the litigation. The main provision is often not made until shortly before the hearing commences. In saying what we have in this regard, we ought not to be taken to be intending in any way to affect the exercise of the discretion which the primary judge will have to determine the outcome of the application.
To the extent that an examination of the merits is relevant to an application for security for costs, there is no hint of a suggestion that there is not a bona fide dispute between Mr Joye and Cortaus. It suffices that there appears to be a triable case: Equity Access Ltd v Westpac Banking Corporation [1989] 11 ATPR 40,972 at 50,636. Even if the examination were to establish that the case of Mr Joye was so strong that Cortaus should not proceed with the litigation, that would not make it irrelevant to determine in the meantime the question for security of costs.
Mr Joye has incurred and will continue to incur costs during such time as the litigation with Cortaus is extant. It has not been suggested that the litigation should be stayed pending the outcome of the examination. Nor is it easy to see how the question of what assets Mr Joye might have could have any legitimate connection with an application by him for security for his costs in the event that he should turn out to be successful. The case is one where Cortaus is not merely a corporation, a circumstance relevant to the making of an order for security for costs, but a corporation in liquidation. Mr Joye is thus in a position where his entitlement to an order for security for his costs, not merely for the costs already incurred by him but also for future costs, is quite strong. It is difficult to see in these circumstances that there can be any real connection between the examination summons on the one hand and the application for security for costs on the other.
It is an important principle of law that a person who regularly invokes the Court's jurisdiction, that is to say, in circumstances not constituting an abuse of process, is entitled to have that jurisdiction exercised: Oceanic Sun Line Special Company Inc v Fay (1988) 165 CLR 197 at 233, 238-9 per Brennan J and at 241 and 243 per Deane J. It may have been otherwise if Mr Joye had presently been in contempt of court in respect of the examination summons. That, however, is not the case on the evidence presently before us. In the circumstances, there being no relevant connection between the examination summons and the fate of the appeal before Branson J, on the one hand, and the application for security for costs on the other, his Honour was in error in adjourning the motion for security for costs indefinitely. Accordingly, the appeal should be allowed with costs, the order of his Honour adjourning the motion for security for costs set aside and in lieu thereof it should be ordered that Mr Joye's motion for security for costs be fixed for hearing before a judge of the Court.
I certify that this and the
preceding eight (8) pages
are a true copy of the Reasons
for Judgment herein of their Honours.
Associate:
Date: 28 March 1996
Counsel and Solicitors DMJ Bennett QC with P Brereton &
for Appellant: I Jackman instructed by Cowell Clarke as agents for Speed & Stracey
Counsel and Solicitors J Sulan QC instructed by
for Respondent: Piper Alderman
Date of Hearing: 17 November 1995
Date Judgment Delivered: 28 March 1996
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