Lollback v Brakepower Pty Ltd

[2010] NSWSC 1332

CITATION:	Lollback v Brakepower Pty Ltd [2010] NSWSC 1332
HEARING DATE(S):	16/11/10
JUDGMENT DATE :	16 November 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	16 November 2010
DECISION:	In the end therefore, it is a question for the liquidator. He can elect not to read his affidavits and thereby protect himself from cross-examination or he can elect to read them and be cross-examined.
CATCHWORDS:	PROCEDURE - cross-examination of deponent of affidavit - application for inquiry into conduct of liquidator under Corporations Act 2001 - liquidator wishes his affidavit to be read but says he should not be subjected to cross-examination - concurrent application for review of registrar's decision fixing liquidator's remuneration - liquidator's affidavit also relevant to that - whether cross-examination should be dispensed with
LEGISLATION CITED:	Corporations Act 2001 (Cth), s 536
CATEGORY:	Procedural and other rulings
CASES CITED:	Australian Securities and Investments Commission v Rich [2004] HCA 42; (2004) 220 CLR 129 BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; (2010) 79 ACSR 588 GPI Leisure Corporation Ltd v Herdsman Investment Pty Ltd (No 3) (1990) 20 NSWLR 15 Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61
PARTIES:	Mark Lollback - Plaintiff Brakepower Pty Ltd - First Defendant David Anthony Ross as Liquidator of Brakepower Pty Ltd - Second Defendant
FILE NUMBER(S):	SC 2010/18159
COUNSEL:	Mr G D McDonald - Plaintiff Mr A W Smith - Defendants
SOLICITORS:	JT Law - Plaintiff MSB Lawyers - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY 16 NOVEMBER 2010

2010/18159 MARK LOLLBACK v BRAKEPOWER PTY LIMITED & ANOR

JUDGMENT (re cross-examination of Liquidator)

1 Presently before me are two applications by Mr Lollback, the controller of Brakepower Pty Limited, a company subject to court ordered winding up.

2 One application is for review of a decision of a registrar fixing remuneration of the liquidator. The other is for an order or direction that the court enquire into the conduct of the liquidator under s 536 of the Corporations Act 2001 (Cth).

3 The liquidator himself has filed an application for review the registrar's decision on his remuneration but has not pressed that application, being content to abide by the decision on Mr Lollback's application in that respect.

4 Mr Smith, counsel for the liquidator, identified a number of affidavits of the liquidator that are to be read upon the hearing of the two applications. He objects, however, to the liquidator being cross-examined and submits that there should be no cross-examination of the liquidator.

5 The basis for this submission has several aspects to it. Mr Smith refers to the nature of the application for a s 536 inquiry. He points out that the court is now considering the first of the three stages identified in BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; (2010) 79 ACSR 588 at [42] and that its function is confined to deciding whether an enquiry is warranted. As a result, the only question is whether the person seeking the initiation of such an enquiry has identified something about the liquidator's conduct that constitutes a sufficient basis for further investigation. The question is, of its nature, a preliminary one, not involving any detailed penetration of factual matters.

6 From that point Mr Smith calls in aid an analogy with cases in which misconduct potentially productive of penalty is involved. He says that the person whose conduct is or may be the subject of criticism should not, in fairness, be required to break his or her silence until specific allegations are formulated and pressed in an appropriate way.

7 The response of Mr McDonald (who appears for Mr Lollback) is that one must remember that this hearing is also concerned with the remuneration question, in that Mr Lollback's application for review of the registrar's decision on that matter is before the court at the same time as the application for exercise by the court of its power to institute an enquiry into the liquidator's conduct. This, Mr McDonald says, makes it appropriate for the liquidator to be cross-examined in the usual way, given that he intends to rely on his affidavits and that notice that he was required for cross-examination was duly given`.

8 Mr Smith says that the remuneration aspect should be approached in the same way as an application for the fixing of remuneration by the court in the first place. He points, in that connection, to the principle that the procedure for determining remuneration should be a summary one, not unlike that applicable to the taxation of solicitor's costs under the old system.

9 But this, of course, is not an application for the fixing of remuneration. It is an application for review under rule 49.19 to which observations of Basten JA in Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61at [52] apply - from which it is clear that fresh evidence may be received and error, although not an essential element, may be enquired into.

10 The problem for Mr Lollback is that the two applications are being progressed together and no application of the liquidator himself is now before the court; also that there is overlap between the two applications in that conduct of the liquidator related to remuneration plays a part also in the application concerning a possible inquiry. Mr McDonald said, in effect, although he did not put it in precisely this way, that the liquidator should not be allowed to put his own review application in respect of the registrar's decision to one side and simply take a free ride on Mr Lollback's review application and that the liquidator should in substance be regarded as a party actively seeking relief.

11 I do not accept that submission. If Mr Lollback chooses, as he has done, to progress his review application in respect of the registrar’s decision, there is no need for the liquidator’s own review application to be pursued if the liquidator is not minded to press it; and the court will have regard to the whole of the material placed before it relevant to the matter to be reviewed.

12 I consider that there is significant force in the points taken by Mr Smith about the inappropriateness of cross-examination in a context where the court is asked to make a positive decision on the question whether there should be an enquiry into a liquidator's conduct. It would, in my view, be inconsistent with the due conduct of such an application to require the liquidator to put himself in a position where he could be questioned in a way calculated to elicit, if not admissions, then at least information with the aid of which the applicant for the order directing enquiry could make a more forceful case. Given the supervisory and disciplinary nature of a s 536 inquiry, the analogy with civil penalty proceedings is, I think, pronounced: see Australian Securities and Investments Commission v Rich [2004] HCA 42; (2004) 220 CLR 129.

13 But if that is so, it may be said that it is inconsistent with the liquidator's desire to exercise a right to remain silent that he should give evidence in chief by affidavit. He cannot have his cake and eat it too.

14 It is clear that the court has a discretion to allow a witness's affidavit to be read and to disallow cross-examination. I refer to the decision of Young J in GPI Leisure Corporation Ltd v Herdsman Investment Pty Ltd (No 3) (1990) 20 NSWLR 15. It is made clear there that the court's discretion on the matter of cross-examination is to be exercised in such a way as is best calculated to ensure a fair trial.

15 In this case where, as I have said on more than one occasion, there are two applications before the court at the same time, the considerations relevant to possible penalty or disciplinary consequences cause me to think that I should allow the liquidator to remain silent, if he wishes to do so, which means that he must elect not to read his affidavits if he does not want to be cross-examined. And considerations relevant to the review of remuneration cause me to think that the liquidator's affidavits should be received, if he wishes them to be, but only on the usual basis that he can be then cross-examined.

16 In the end therefore, it is a question for the liquidator. He can elect not to read his affidavits and thereby protect himself from cross-examination or he can elect to read them and be cross-examined.

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