Makris v Sheahan No. Scgrg-90-2215

[2000] SASC 335

In the Matter of BOSUN PTY LTD (In Liquidation)
MAKRIS & ORS v SHEAHAN
[2000] SASC 335

Full Court:  Doyle CJ, Williams and Wicks JJ (ex tempore)

1................ DOYLE CJ....... This is an application for leave to appeal against a decision given by Debelle J on 23 June 2000. Application is also made for leave to appeal from a decision of Debelle J given on 18 August 2000, in which decision Debelle J declared that a purported appeal against the decision just referred to was incompetent, leave to appeal against the decision being required.

1. I will refer to these decisions as the first decision and the second decision.

2. By the first decision, Debelle J dismissed an appeal against a Master’s decision refusing to stay, as an abuse of process, an order under s.596A of the Corporations Law that the first applicant, Mr Makris, attend before the court for an examination. The Master had also ordered that certain companies produce certain documents for the purposes of the examination. Although a stay was sought by Mr Makris and the companies, it suffices hereafter to refer to Mr Makris.

3. The purpose of the examination was to ascertain whether Mr Makris had the means to satisfy a judgment against him, if the liquidator were to obtain one against him. That is, a judgment in proceedings yet to be instituted. Mr Makris submitted before Debelle J, and now submits, that the liquidator who obtained the order for examination has no cause of action against him. He submits that the examination as to his ability to satisfy a judgment must be an abuse of process. That argument was rejected by Debelle J.

4. The application for leave to appeal against the first decision and the second decision is brought pursuant to R 94.02 of the Supreme Court Rules. Pursuant to R 94.03 of the Rules, the application has been considered privately by the Full Court comprised of me, Williams J and Wicks J.

5. We are unanimously of the opinion that leave to appeal against the first decision and against the second decision should be refused. In brief, our reasons are as follows.

6. An application for a stay as an abuse of process on the grounds advanced by Mr Makris cannot be the occasion to try the foreshadowed action, or even to form a preliminary view about it. On the stay application, the action is not before the Court. Nor is an application for a stay a convenient or appropriate vehicle on which to examine the foreshadowed cause of action. We agree generally with the approach taken by Debelle J. The extent to which the Court can consider the prospects of a liquidator’s success in an action foreshadowed as the basis for an examination order must be very limited. If the cause of action is plainly untenable, then it may be that an abuse of process may be made out. Alternatively, one might look independently for some evidence of an intended misuse of the court’s process, but in this case there is no suggestion of that. The claim for a stay revolves around the prospects of success in the action foreshadowed by the liquidator.

7. As Debelle J points out, the issue is whether the liquidator’s claim is a claim for debt incurred by means of a fraud or by a fraudulent breach of trust or by a forbearance obtained by fraud. If it is, the claim is not discharged by the bankruptcy of Mr Makris and may still be brought. Mr Makris submits that this requires proof of common law fraud, and that that cannot be shown in this case. We are prepared to assume that common law fraud cannot be shown, as that does not seem to have been put in issue before Debelle J. But the meaning of the term fraud in the relevant statutory provision is not settled by authority. It is arguable that a relatively wide meaning should be given to the statutory expression. In the light of that, one cannot say that the cause of action foreshadowed by the liquidator is so self-evidently untenable as to give rise to the inference that the order for examination is sought for an improper purpose and should be stayed as an abuse of process.

8. That being so, in our opinion, Debelle J was clearly right in concluding that an abuse of process could not be made out. For those reasons, we refuse leave to appeal against the first decision on the basis that the appeal has no reasonable prospect of success.

9. In the second decision, Debelle J held that leave to appeal was required and that there was no appeal as of right. He said that the decision of the Master, refusing a stay, was an interlocutory order. We agree with his approach. In any event, we would refuse leave to appeal on the grounds that the proposed appeal on this point does not raise any issue of principle. It would involve an application of well-established principle, which principle has admittedly given rise to considerable difficulty in its application. However, establishing its meaning in the present context would not, of itself, establish any significant point of principle, but merely constitute another illustration of the application of the principle.

10. Accordingly, we refuse leave to appeal against the second decision.

11. For those reasons, the order of the court is that leave to appeal against the decision of Debelle J made on 23 June 2000 be refused, and that leave to appeal against the decision of Debelle J made on 18 August 2000 be refused. The court directs that notice of the decision be given to the applicants together with a copy of these reasons.