Munnings v Australian Government Solicitor

[1994] HCA 3

HIGH COURT OF AUSTRALIA

DAWSON J

THE DUKE GROUP LIMITED (IN LIQUIDATION); THE CORPORATIONS LAW OF SOUTH AUSTRALIA and GERAH IMPORTS PTY. LTD. v. THE DUKE GROUP LIMITED (IN LIQUIDATION)

(1994) 68 ALJR 196

18 February 1994

Orders

Application dismissed with costs.

Decision

DAWSON J This is an application to stay the operation of orders made by a Master of the Supreme Court of South Australia pursuant to ss.596B and 596D of the Corporations Law. Those sections provide for the summoning of persons for examination and the production of documents in relation to the examinable affairs of a corporation.

2. The respondent corporation is The Duke Group Limited. It is being wound up pursuant to an order of the Supreme Court of South Australia. The liquidator has commenced proceedings against the West Australian partners of an accounting firm, Nelson Wheeler. He alleges that the West Australian partners were negligent in preparing a report supplied to the corporation.

3. The liquidator has also issued proceedings against a number of defendants who are alleged to be the partners in a national partnership of Nelson Wheeler. Whether the West Australian partners were members of a national partnership remains a live issue in the litigation. It is alleged that there is a national partnership, and that the national partners are liable for the negligence of the West Australian partners.

4. The applicants in the current application before me are, or have been, involved in the West Australian partnership or the national partnership of Nelson Wheeler. The liquidator sought to have the Court examine them pursuant to the provisions of the Corporations Law. He sought information and documents about whether the West Australian partners were part of the national partnership. He also sought information about the level of insurance covering the West Australian and national partners which might be available to satisfy any judgment obtained by him in the negligence proceedings.

5. The Master of the Supreme Court made orders on 22 September 1993, varied on 1 November 1993, that the applicants attend an examination for these purposes. The applicants appealed to the Full Court of the Supreme Court of South Australia, alleging that the purpose of the examination was beyond power, and in particular, that the nature of the national partnership and the extent of the partners' insurance cover were not part of the "examinable affairs" of the corporation. The Full Court dismissed their appeal on 23 December 1993 ((1) Gerah Imports Pty. Ltd. v. The Duke Group Ltd. (in liq.) (1994) 12 ACLC 116.). On 24 December 1993 the Master again varied his orders and set down the examination for 21 February 1994.

6. The applicants then applied to Debelle J for a stay of the Master's orders pending an application for special leave to appeal against the judgment of the Full Court. On 14 January 1994 he granted a stay. The liquidator then appealed to the Full Court. Millhouse
and Olsson JJ, King CJ dissenting, allowed the appeal on 17 February 1994 and removed the stay.

7. In the meantime an application for special leave to appeal to this Court had been lodged on 14 January 1994. As that application was one day out of time, the applicants also filed an application for enlargement of time. By a summons issued yesterday, 17 February 1994, the applicants seek a stay of the order of the Master pending the hearing of their application for special leave to appeal. If I do not
grant the stay, the applicants will be required to attend an examination on 21 February 1994; if I do grant the stay, it is likely that the application for special leave will be heard in the week beginning 21 March 1994.

8. The inherent jurisdiction of this Court to order a stay of proceedings pending the determination of an application for special
leave is well established ((2) See Re Federated Ironworkers' Association; Ex parte Australian Building Construction Employees' and Builders Labourers' Federation (1981) 55 ALJR 395 at 396; 34 ALR 208 at 211; Jennings Construction Ltd. v. Burgundy Royale Investments Pty. Ltd. (No.1) (1986) 161 CLR 681 at 683.). It is an extraordinary
jurisdiction which will only be exercised in exceptional circumstances.

9. Exceptional circumstances may arise where the subject-matter of the proposed appeal will be lost without a stay, with the result that the application for special leave and any subsequent appeal will be nugatory ((3) Rahme v. Commonwealth Bank (1993) 68 ALJR 53 at 54-55;
117 ALR 618 at 620-621.). Clearly, in the present case, the subject-matter of the litigation - the immunity of the applicants from examination and from the production of documents concerning the matters in contention - will have disappeared before the application for special leave is heard if the application for a stay is refused. Having regard to the date of the proposed examinations, in the absence of a stay the questions will have been asked and answered and the documents produced before the application for special leave is heard.

10. Notwithstanding this circumstance, the jurisdiction to grant a stay is discretionary and other matters are relevant to the exercise
of the discretion.

11. Importantly, the applicant must establish a substantial prospect that special leave to appeal will be granted ((4) Jennings Construction Ltd. v. Burgundy Royale Investments Pty. Ltd. (No.1) (1986) 161 CLR 681; Elspan International v. Aerospatiale (1992) 67 ALJR 177 at 178.). It is, I think, the prospect of success in that application which is significant, although, of course, the prospect of ultimate success in any appeal (if leave is granted) is an important element to be taken into account by the Court in deciding whether or not to grant special leave ((5) See Rahme v. Commonwealth Bank (1993) 68 ALJR at 54; 117 ALR at 620.).

12. In addition, there are other matters to be taken into consideration in the exercise of the discretion to grant a stay. The failure, if any, of the applicants to pursue such avenues as are available in the court below for obtaining a stay is of significance. Any loss which may be caused to interested parties by the granting of a stay must be taken into account. And the balance of convenience is always something to be considered ((6) Jennings Construction Ltd. v. Burgundy Royale Investments Pty. Ltd. (No.1) (1986) 161 CLR at 685.).

13. In the present case, the application for special leave has been instituted by the applicants and is likely to be heard and determined within five weeks. Clearly, when one balances that relatively short delay against the loss of immunity which the applicants seek to avoid by an appeal, the balance of convenience lies in granting the application. No financial loss during that time to the respondent or any other interested party, if a stay is granted, has been demonstrated. The applicants have fully pursued their opportunity to obtain a stay in the court below, having been granted a stay at first instance, which they lost, by a majority, on appeal to the Full Court.

14. That leaves the question of the applicants' prospect of success in their application for special leave to appeal.

15. The section of the Corporations Law which is critical is s.596B. That confers power upon the Court to summon a person for examination about a corporation's examinable affairs. When regard is had to the definitions of "examinable affairs", "affairs" and "property" contained in ss.9 and 53, "examinable affairs" include any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and include a thing in action.

16. Clearly the rights of action, if any, of the corporation against the applicants are examinable affairs within the meaning of the legislation. The Full Court concluded that an examination of those rights under the relevant provisions was not confined to their existence but extended to their extent and value. Plainly the latter are matters of considerable moment to the liquidator of a corporation in pursuing the assets of the corporation in an economical and efficient manner. And as was pointed out in Hamilton v. Oades ((7) (1989) 166 CLR 486 at 496.), a liquidator performs a public function in which one of his duties is to protect the interests of the creditors.

17. It is not contended before me by the applicants that the examination ordered by the Master is oppressive. What is said is that it extends beyond the affairs of the corporation to the affairs of other persons and is merely for the purpose of ascertaining their potential liability and their capacity to satisfy any judgment against them. However, as I have said, these are matters of importance to a liquidator, going in a practical way as they do to the value of the property of the corporation.

18. The applicants are unable to point to any authority in their favour. The decision of Drummond J in Re Interchase Corporation
Ltd. ((8) (1993) 12 ACLC 97.) is indeed against them. The decision of the Court of Appeal of New South Wales in Kelly v. Murphy ((9) (1993) 11 ACLC 1230.) is to be explained upon the basis that the trustees only sought information for a limited purpose, which did not extend to discovering the capacity of the partners of the firm of solicitors in question to satisfy any judgment. In any event, the question of oppression was raised in relation to the extended examination eventually sought in that case, a question which is not now raised in these proceedings.

19. In the end, I am not satisfied that the applicants have discharged the onus upon them of demonstrating that the application for special leave enjoys a substantial prospect of success. The power conferred by s.596B is wide and I am not persuaded that the conclusion reached by the Full Court involves any error either in construction of the provision or otherwise.

20. The application is accordingly refused.