Onefone Australia Pty Ltd v One.Tel Ltd

[2007] NSWSC 69

Reported Decision: 61 ACSR 246

New South Wales

Supreme Court

CITATION:	Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 69
HEARING DATE(S):	08/02/07
JUDGMENT DATE :	14 February 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Applications by prospective examinees for leave to be heard without becoming parties dismissed with costs
CATCHWORDS:	CORPORATIONS - winding up - special purpose liquidator appointed to consider whether viable causes of action arose from particular events - application by special purpose liquidator for issue of examination summonses - application by prospective examinees for leave to be heard on hearing of liquidator's application - whether liquidator's ability to pursue potential proceedings despite time bars may be preserved by agreements not to rely on such bars - particular bar created by s.588FF(3) of Corporations Act - where extended period fixed within three year period - whether court may order further extension
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001, s.19 Civil Procedure Act 2005, s.3(1) Corporations Act 2001 (Cth), Part 5.9, ss.1337B(2), 588FB(1), 588FF(1), 588FF(3), 596A, 596B, 596C(1), 596C(2), Fair Trading Act 1987, ss.42, 68(2) Limitation Act 1969, s.68A Supreme Court (Corporations) Rules 1999, rules 2.13(1), 11.3(1), 11.4, 11.5(2) Trade Practices Act, s.82(2) Uniform Civil Procedure Rules 2005, s.36.16(3)
CASES CITED:	Australian Securities and Investments Commission v Karl Suleman Enterprizes Pty Ltd (2004) 52 ACSR 103 BP Australia Ltd v Brown (2003) 58 NSWLR 322 Davies v Chicago Boot Co Ltd (2006) 58 ACSR 505 Gordon v Tolcher (2006) 231 ALR 582 Kalls Enterprises Pty Ltd v Baloglow [2006] NSWSC 617 McGrath v HIH Insurance Ltd (2004) 205 ALR 643 Murdoch v Weston (2004) 49 ACSR 166 New Cap Reinsurance v Reaseguros Alianza SA [2004] NSWSC 787 Onefone Australia Pty Ltd v One.Tel Ltd (2003) 48 ACSR 562 Onefone Australia Pty Ltd v One.Tel Ltd (2006) 57 ACSR 279 Onefone Australia Pty Ltd v One.Tel Ltd (2006) 58 ACSR 466 Onefone Australia Pty Ltd v One.Tel Ltd [2006] NSWSC 1434 Onefone Australia Pty Ltd v One.Tel Ltd [2006] NSWSC 1447 Re Freshkept Technology Pty Ltd [2000] VSC 500 Re Shepherds Producers Co-operative Ltd (2006) 65 NSWLR 381 Rodgers v Commissioner of Taxation (1998) 88 FCR 61 Western Australia v Wardley Australia Ltd (1991) 30 FCR 245
PARTIES:	Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff Talent2 Works Pty Ltd - Fourth Plaintiff One.Tel Limited - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant Paul Gerard Walker - Special Purpose Liquidator Martin Green and Darren Miller - CPH/PBL Applicants News Limited, John Hartigan, Peter Macourt and Ian Philip - News Limited Applicants
FILE NUMBER(S):	SC 5291/03
COUNSEL:	Mr N.A. Cotman SC/Mr R.D. Glasson - Special Purpose Liquidator Mr T.F. Bathurst QC/Ms K.C. Morgan - CPH/PBL Applicants Mr M.A. Pembroke SC - News Limited Applicants
SOLICITORS:	NOT Lawyers - Special Purpose Liquidator Atanaskovic Hartnell - CPH/PBL Applicants Allens Arthur Robinson - News Limited Applicants

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

BARRETT J

WEDNESDAY, 14 FEBRUARY 2007

5291/03 ONEFONE AUSTRALIA PTY LIMITED & 3 ORS v ONE.TEL LIMITED (IN LIQUIDATION) & 2 ORS

JUDGMENT

Background

1 Mr Weston is the “special purpose liquidator” of One.Tel Limited, a company in liquidation. Mr Sherman and Mr Walker were already in office as liquidators in the ordinary course when Mr Weston was appointed to be an additional liquidator by order made by the court on 23 December 2003. I shall refer to Mr Weston as “the SPL”.

2 The appointment of the SPL was made for a particular purpose, namely, to consider whether causes of action arose from a certain series of events that had occurred shortly before the advent of voluntary administration preceding winding up. It was perceived that Mr Sherman and Mr Walker might be made parties to any resultant litigation.

3 The particular matter with respect to which the SPL was thus assigned special responsibility was described in order 2 made on 23 December 2003:

“On the assumption that the Company became insolvent as a result of the cancellation of the Renounceable Rights Issue, the Special Purpose Liquidator consider and make recommendations to the creditors as to whether:
(a) any rights of action exist in respect of which there is a limitation period for the commencement of any such action of less than six years, and if necessary,
(b) any action should be commenced against any person in relation to any such rights of action referred to in subparagraph (a) above; and
(c) the Special Purpose Liquidator should apply to extend the limitation period of any such action.”

4 The reference here to the cancellation of the renounceable rights issue is a reference to a decision made on or about 29 May 2001 that One.Tel would not proceed with a rights offering of shares determined upon and announced to the market earlier in that month.

The SPL’s Part 5.9 application

5 On 15 December 2006, the SPL filed an interlocutory process by which he sought certain orders under Part 5.9 of the Corporations Act 2001 (Cth). Specifically, he sought orders under ss.596A and 596B for the issue of summonses for examination of certain persons about examinable affairs of One.Tel. An amended interlocutory process was filed on 20 December 2006.

6 One of the five persons in respect of whom application is made under s.596A is Mr Macourt. Four of the sixteen persons in respect of whom application is made under s.596B are Mr Hartigan, Mr Philip, Mr Green and Mr Miller. Mr Hartigan, Mr Macourt and Mr Philip (whom I shall call “the News associates”) are employed by or otherwise associated with News Limited. Mr Green and Mr Miller are employed by or otherwise associated with Consolidated Press Holdings Ltd (“CPH”) or Publishing and Broadcasting Ltd (“PBL”). I shall refer to them as “the PBL associates”.

The applications by the prospective examinees

7 By interlocutory process filed on 29 January 2007, the three News associates (and News Limited itself) sought, first, an order granting them leave to be heard on the SPL’s application under Part 5.9 and, second, an order granting them access to (and permission to copy) the affidavit filed by the SPL pursuant to s.596C(1) in support of the application for the issue of examination summonses under s.596B.

8 Also by interlocutory process filed on 29 January 2007, the two PBL associates made an application for orders in the same terms as those sought by the News associates.

9 I shall refer to the persons by whom the two interlocutory processes were filed on 29 January 2007 as “the applicants”.

The evidence

10 All three interlocutory processes – the SPL’s amended interlocutory process filed on 20 December 2006 and the two interlocutory processes filed on 29 January 2007 – came before me on 8 February 2007. On that occasion, three affidavits were read and certain documents were tendered. The affidavits were affidavits of solicitors for the applicants. The documents tendered were tendered by those parties and consisted of exhibits to the several affidavits plus a copy of a document purporting to be a copy of the minutes of meeting of One.Tel held on 28 May 2001.

11 No evidence was, on 8 February 2007, read or tendered by the SPL. In particular, the SPL did not seek to rely on the affidavit filed in conformity with s.596C(1) of the Corporations Act supporting the application under s.596B. In accordance with s.596C(2), that affidavit is not available for inspection except as the court orders. Under rule 11(4) of the Supreme Court (Corporations) Rules 1999, the affidavit is filed in a sealed envelope. The affidavit has not been sighted by the applicants under the interlocutory processes filed on 29 January 2007 – hence their applications for access to it, being applications advanced by reference to s.596C(2).

The position taken by the prospective examinees

12 It was submitted by Mr Bathurst QC and Mr Pembroke SC (who appeared for the CPH/PBL applicants and the News Limited applicants respectively) that the court should, in what they characterised as the exceptional circumstances of this case, depart from the usual course of events by which a liquidator applies ex parte for the issue of examination summonses and, if summonses are issued, serves them upon the persons summoned for examination and then faces the possibility that any person served may apply to the court for an order discharging the summons served on the person. Specific provisions are made in these respects by the Supreme Court (Corporations) Rules. In particular, rule 11.3(1) says that the application for issue of the summons may be made without notice to any person; and rule 11.5(2) says that a person served with a summons may, within three days after being served, apply to the court for an order discharging the summons.

13 The special circumstances said to warrant departure from the usual procedure (so that the prospective examinees become participants in the hearing of the liquidator’s application for the issue of examination summonses) are, it is said, found in the history of the SPL’s appointment and activities. It is to that history that I now turn.

The history – appointment of the SPL

14 The factor central to the appointment of the SPL in December 2003 was the involvement of Mr Sherman, one of the liquidators, in events leading up to the decision of 29 May 2001 to cancel the rights issue. He appears to have played an advisory role in that connection. A consequence or possible consequence was mentioned in the judgment of Windeyer J upon the application for the appointment of a special purpose liquidator (see Onefone Australia Pty Ltd v One.Tel Ltd (2003) 48 ACSR 562 at [11]):

“There can be no doubt that if there were some claim against the directors for breach of duty in respect of the cancellation of the rights issue, then this sort of litigation being as it is, there is a good chance that Mr Sherman would be joined by the directors as a cross-defendant, thereby placing him in an almost impossible position. It is not necessary to decide whether the limited part played by Mr Sherman in the meetings on 28 and 29 May 2001, would result in the company having any claim against him or the directors having any claim against him for advice given or not given at those meetings. There is some possibility of some liability. That would obviously place Mr Sherman in a position of conflict in considering whether or not a claim should be brought on behalf of the company against the directors for some loss arising from the cancellation issue.”

15 At the time Windeyer J gave judgment, civil penalty proceedings initiated by Australian Securities and Investments Commission in the wake of the collapse of One.Tel were in progress, although the hearing had not begun. These are the “ASIC v Rich” proceedings. They are still in progress. The hearing has not yet concluded and judgment has not yet been reserved. Windeyer J said in his judgment (at [12]), after referring to the potential conflict mentioned in the foregoing extract:

“Mr Sherman is, I think, well aware of this potential conflict. If there is some possibility of a claim against those responsible for the cancellation the attitude which he has taken and which the committee of creditors has approved, is that any such decision should await the outcome of proceedings which the Australian Securities and Investment Commission has taken against Mr Rich and others associated with One.Tel. The reason put forward for taking that stance is that, if the financial position of the company were such at 29 May 2001, that it was insolvent and would remain insolvent even with a capital injection of $132 million, then the rights issue could not have proceeded as a prospectus could not have properly been issued in which circumstance there could be no possible claim against the directors for cancelling the issue as that was the only action properly available to them. The limitation period for an action against directors for breach of duty in cancelling the renounceable rights issue would be six years from 29 May 2001. It is known that the proceedings by ASIC against Mr Rich and others are fixed for hearing in this Court on 4 July 2004. Evidence before me establishes that solvency of the company is an issue in those proceedings. While one does not know the evidence of the defendants the evidence of ASIC without going into any detail will be that $132 million would not have been sufficient to enable the company to continue in business. It follows from this that if that were the only question I would determine that the decision of the liquidator to wait and see the result of those proceedings was a proper determination and there would be no proper reason to appoint the special liquidator in accordance with the resolution at this stage.”

16 His Honour later referred to a possibility, apparently raised by counsel seeking the appointment of a special purpose liquidator, “that the cancellation of the rights issue would amount to an uncommercial transaction within s.588FB(1) of the Act”, that is, the Corporations Act. He referred to the special limitation period applying under s.588FF(3) for these purposes. Windeyer J’s judgment concluded (at [19]):

“It is not to the benefit of creditors to have a vast sum of money spent on establishing the solvency question when this is going to be established at no expense to them unless they will lose valuable rights by reason of delay. I accept that there is a reasonable apprehension of conflict in the position of the liquidator in connection with matters arising out of the cancellation. Were it not for the possibility of some order being made for the benefit of the company through that cancellation being held to be an uncommercial transaction I consider the decision of the liquidator to wait and see reasonable and proper. In light of the matters put before me on the uncommercial transaction question I consider there is a basis for ordering there be further investigation by a special purpose liquidator but that for a start this should be done on the basis of an assumption that the company became insolvent as a result of such cancellation. I will need to hear submissions as to whom the special purpose liquidator should be.”

The history – undertakings by prospective examinees

17 Subsequently, in the early part of 2004, the SPL procured the issue of examination summonses directed to some 34 persons, including persons associated with News and CPH/PBL. On 6 April 2004, orders were made by consent that the summonses be discharged. As part of the consent regime, PBL, CPH, News and certain persons associated with them

(a) consented to the making of an order under s.588FF(3)(b) of the Corporations Act extending from three years to six years the period for the making of any s.588FF(1) application; and
(b) undertook to the court not to plead any limitation defence or time bar in proceedings brought under the Fair Trading Act 1987, being proceedings commenced within six years after accrual of the cause of action.

18 It should be noted, in the latter connection, that the limitation period made applicable by s.68(2) to actions for damages based on s.42 of the Fair Trading Act was, at the time of the relevant events, a period of three years. The enlargement of the period to six years was effected by an amending Act of 2003.

19 The undertakings given in April 2004 were given subject to conditions. One of the conditions was the following condition (c):

“that neither the special purpose liquidator nor any other liquidator of One.Tel seeks further to examine any of the executives and employees of any of the PBL/CPH Parties in relation to any of the claims referred to in paragraphs 1 and 2 above, until the earliest of the following:
(i) the outcome of the ASIC proceedings against Mr Jodee Rich and certain other directors and former directors of One.Tel is generally known;
(ii) six months prior to the end of any extended or substituted six year limitation period referred to above; or
(iii) further order by the court (on which the PBL/CPH Parties have been herd before such order is made) that such examination not be further deferred,
and if required by the special purpose liquidator, the court states that it is permissible for that liquidator so to do.”

20 On 8 April 2004, Windeyer J gave judgment upon an application for the discharge of examination summonses that the SPL had caused to be issued in respect of certain partners of Ernst & Young and Minter Ellison: see Murdoch v Weston (2004) 49 ACSR 166. The judgment made it clear that the extension of the limitation period under s.588FF (which had by then been effected by order under s.588FF(3)(b)) meant that “there is no need for anybody to be examined at this time in connection with that matter”. Dealing with an argument that the examinations should proceed because, as time passed, memories might fade and persons might become unavailable, Windeyer J said (at [11]):

“I do not think that would be a sufficient reason to allow the examinations to take place at this stage, because the terms upon which the special purpose liquidator was appointed in any event really rely upon there being some cause of action that might be commenced before 29 May 2004. As it is no longer necessary to commence any claim for an uncommercial dealing by that date, in my view there is no purpose that would justify the expenditure of what appears to be vast sums of money on the examinations at this stage.”

21 His Honour also referred to the undertakings given by the “principal players” not to plead any time bar in Fair Trading Act proceedings. After referring briefly to the likely parameters of any such proceedings, Windeyer J said (referring to his original judgment of 19 December 2003):

“16 The special purpose liquidator really does not know at the present time whether there is any conduct which might or might not have been misleading or deceptive. Although that is put forward as a ground of objection, it is not really, in my view, a proper ground of objection to examinations taking place, because one of the purposes of such examination is to see whether or not a company in liquidation has or may have an asset that might become available for distribution to creditors. It is not necessary to identify, at least with any precision, the action to which questions might be directed but they must be directed having some purpose in mind.

17 It has always been clear, I think, and has been made perfectly clear by the letter written by the solicitors for the special purpose liquidator on 6 April 2004, that the purpose of the investigation was directed to the cancellation of the rights issue, which was announced on 17 May and, in essence, cancelled on 29 May, and the participation of the PBL and News Limited companies in relation to that; and advice, or lack of advice, given to the board of One.Tel by directors of that company during that period; and representations made to the board by any director or directors of One.Tel concerning the financial position of the company.”

22 On 16 April 2004, Windeyer J gave a direction that the SPL was justified in not conducting further investigations into the circumstances surrounding the cancellation of the rights issue without further order of the court.

The history – the SPL’s powers varied

23 Things remained in that state for two years, so far as the regime applicable to the SPL and the matter of examinations by him were concerned. On 26 April 2006, White J made orders varying the orders appointing the SPL: see Onefone Australia Pty Ltd v One.Tel Ltd (2006) 57 ACSR 279. I quote in full order 2 made on that occasion:

“The SPL is justified in performing work of the following nature:
(a) Liaising with the parties to the ASIC v Rich proceedings, and their legal advisors, to obtain access to:
(i) transcripts of evidence given, or to be given, in the ASIC v Rich proceedings;

(ii) documents tendered or to be tendered as evidence in, or marked for identification or to be marked for identification in, the ASIC v Rich proceedings;

(iii) affidavits and witness statements filed, or to be filed, in the ASIC v Rich proceedings;

(iv) documents discovered, or to be discovered, in the ASIC v Rich proceedings;

(v) documents produced, or to be produced, under Subpoenas for Production and Notices to Produce, in the ASIC v Rich proceedings; and

(vi) the written submissions to be filed by the parties to the ASIC v Rich proceedings at the conclusion of the evidence in the ASIC v Rich proceedings
(collectively ‘ the ASIC v Rich documents ’).
(b) Making such application, as may be necessary, to Austin J, as the trial Judge in the ASIC v Rich proceedings, for orders entitling the SPL to be given access to the ASIC v Rich Documents.
(c) Reviewing the ASIC v Rich Documents and carrying out all work incidental thereto including liaising with the parties to the ASIC v Rich proceedings and their legal advisors for the purpose of:
(i) determining whether the SPL is then in a position to express a concluded view, and make appropriate recommendations to creditors of One.Tel, as to whether any rights of action exist surrounding the cancellation of the RRI; or
(ii) determining whether the SPL should conduct further investigations, including public examinations and if so the nature and extent of those investigations and examinations, so as to then be in a position to express a concluded view, and make appropriate recommendations to creditors of One.Tel, as to whether any rights of action exist surrounding the cancellation of the RRI.
(d) Retaining such advisors, including legal advisors, to assist the SPL in performing the work referred to in sub-paragraphs (a), (b) and (c) above.
(e) Reporting to, and making recommendations to, the members of the Committee of Inspection of One.Tel and, if appropriate, the creditors of One.Tel, in relation to the work referred to above.”

24 As is made clear by White J’s judgment of 26 April 2006 (at [14]), one of the SPL’s purposes in seeking varied powers was “that he no longer be required to assume that One.Tel became insolvent as a result of the cancellation of the renounceable rights issue, but that he review the materials prepared or obtained for the ASIC v Rich litigation with a view to deciding whether he can form a view himself about the matter”. His Honour also referred to another reason:

“16 Another reason for this application is that it is not clear that the evidentiary basis upon which findings of solvency might be made in the ASIC v Rich proceedings would necessarily be the same as might be available in other proceedings. A substantial body of expert evidence which ASIC sought to adduce in those proceedings has been rejected and the defendants to those proceedings have announced that they do not propose to call expert evidence.

17 Allied to that is that it is not clear to me that the precise questions of solvency relevant to the issues raised by the cancellation of the renounceable rights issue, and the events that led up to that, would necessarily be determined in the ASIC v Rich proceedings. Nor is it clear that the parties in those proceedings would have the same interest in relation to that question as One.Tel might have.”

25 One of the considerations that prompted his Honour to vary the SPL’s powers was stated in these terms:

“22 Finally, the creditors of One.Tel are entitled to have the question of whether any such causes of action are to be pursued determined as promptly as possible. There is a public interest also in such claims, if they are to be pursued, being brought on for hearing as soon as possible.”

26 It is pertinent to note, however, that paragraph (c)(ii) of White J’s order 2 clearly envisaged that part of the purpose of review of the ASIC v Rich documents was to form a basis for decision-making on whether examinations should be undertaken. The possibility of future examinations was thus squarely in contemplation.

Changes in circumstances – December 2003 to April 2006

27 It can be seen from the foregoing account that, when the SPL was appointed in December 2003, the court intended that he should not inquire into the solvency of One.Tel at the relevant time. Rather, he was to assume that the company became insolvent as a result of the cancellation of the rights issue. This was because the issue of solvency was known to be central to the ASIC v Rich proceedings which were due to begin just over six months after the December 2003 appointment. By April 2006, however, the ASIC v Rich proceedings had produced no findings on the question of solvency central to the possible causes of action the SPL was to consider. Furthermore, it appeared not only that findings on that matter in ASIC v Rich might not be available for some time but also that the evidence on solvency adduced in those proceedings might not be as extensive as had been thought – added to which doubts had arisen as to whether any such findings would avoid the need for the question of solvency to be addressed anew, and on the basis of fresh evidence, in any proceedings brought by the SPL. The originally envisaged linkage between the ASIC v Rich outcome and the SPL’s efforts was therefore substantially weakened.

28 Another shift in thinking had occurred. By the time the SPL’s powers were expanded on 28 April 2006, he had been in office for almost two and a half years. Almost five years had elapsed since the events concerning the rights issue and the voluntary administration of One.Tel. Limitation periods had come to assume greater relevance. Action had been taken in 2004 to secure an order extending the s.588FF(3) limitation period so as to cause it to expire in May 2007. In addition, certain potential defendants in litigation the SPL might initiate had given undertakings not to plead any limitation defence or time bar in proceedings brought under the Fair Trading Act (see paragraph [17] above), provided those proceedings were brought within six years.

29 As at April 2006, the consensual regime regarding limitation periods had only a little over a year to run.

New moves by the SPL to initiate examinations

30 In September 2006, the solicitors for CPH, PBL and the PBL associates wrote to the SPL’s solicitors offering to agree to extensions of relevant limitation periods so as to cause them to remain extant until six months after delivery of judgment in ASIC v Rich. This offer was made without admissions and on condition that a similar arrangement was made with News Limited and the News associates. A few days later, the solicitors for News Limited and the News associates wrote in corresponding terms to the SPL’s solicitors.

31 There was acknowledgment by the SPL’s solicitors of these letters but no substantive response to the offers they conveyed. Then, in November 2006, the SPL filed an interlocutory process seeking directions that he was justified in taking certain steps, including “applying for orders for public examinations for such persons as the SPL determines appropriate”. The application also raised the associated question whether the principal liquidators should make funds available for this purpose.

32 White J gave judgment on the SPL’s application on 28 November 2006: see Onefone Australia Pty Ltd v One.Tel Ltd [2006] NSWSC 1434. His Honour made it clear that he had declined to deal with the application until it had been considered by One.Tel’s committee of inspection. On 21 November 2006, the committee of inspection, having earlier received a confidential and privileged report, resolved:

“(a) It has reviewed the summary of the Special Purpose Liquidator’s (“SPL”) estimated fees and costs (excluding legal costs) for the period November 2006 to April 2007, totalling $155,047.20 (including GST);
(b) it has reviewed the NOT Lawyers estimate of legal costs of dated 13 November 2006, for the period November 2006 to April 2007, totalling $803,440 (including GST);
(c) it is has reviewed the SPL's interlocutory process dated 14 November 2006 and filed on 17 November 2006;
(d) it supports the Orders and Directions sought by the SPL in the Interlocutory Process.”

This, however, was in a context where the committee had no formal power in relation to the relevant matters and was merely consulted.

33 After noting the attitude of the committee of inspection and referring to the renewed offers received by the SPL in September 2006 from the solicitors of the CPH/PBL interests and the News Limited interests,

White J said (at [32]):

“Although no arrangements for the extension of the limitation period have been finalised with PBL, CPH and News, it appears that those companies, and certain individuals associated with them, are willing to agree not to rely on limitation defences if proceedings are commenced within six months of judgment being delivered in the ASIC v Rich proceedings.”

34 His Honour then said (at [33]):

“Mr Weston has not sought to identify before me any specific reason as to why it is necessary that any person be examined before he is in a position to advise the creditors of One.Tel whether proceedings should be brought against any person in relation to the cancellation of the RRI. That may be because his view is based on confidential and privileged material made available to the Committee of Inspection. Nonetheless, the position remains that I have no better reason than did Windeyer J to think that the expenditure of vast sums of money on public examinations would be well spent. It is true that I have the benefit of the view of the Committee of Inspection, but I do not know on what materials the Committee based its view.”

35 His Honour later repeated that he had “no specific material as to why such examinations are thought necessary at this stage”, adding that he was “not prepared to act on such a generalised description”. The last comment related to the following (at [34]):

“The events surrounding the liquidation of One.Tel have already been the subject of extensive investigation. The general liquidators have conducted examinations, although I was told that their investigations did not cover the ground which Mr Weston would seek to cover. I was told that ASIC had conducted s 19 examinations, and I understood from counsel's submissions that the special purpose liquidator has been given access to the transcripts. Of those examinations, of course, detailed evidence has been given in the ASIC v Rich proceedings which are presently part-heard before Austin J. I was told by counsel for Mr Weston that whilst this material covers, and may resolve, a number of issues, nonetheless, there are other issues which have not been covered, or not covered sufficiently for Mr Weston's purposes. I was told that there will be gaps still to be covered from persons who have been examined, or who have given evidence to date. I was told there are other persons, who have not been examined or given evidence, whom Mr Weston would wish to examine.”

36 White J declined to give a direction that the SPL would be justified in applying for the issue of examination summonses in respect of such persons as he determined appropriate. His reasons, in summary, were (at [39]):

“In my view, provided Mr Weston secures a binding agreement with the potential defendants to an extension of the limitation period, the current regime, whereby he confines himself to a review of relevant materials in the ASIC v Rich litigation, should not be changed. In any event, I am not prepared, on the present materials, to give the Court's imprimatur to the proposed expenditures on the conduct of examinations. I would need to be persuaded by far more specific evidence than is currently before me that the proposed course is necessary to enable Mr Weston to express a concluded view on whether rights of action exist in relation to the cancellation of the RRI. This is particularly so, at the present time, when judgment has not been given in the ASIC v Rich proceedings.”

The SPL’s current applications under Part 5.9

37 Notwithstanding this outcome, the SPL proceeded on 15 December 2006 to file the interlocutory process referred to at paragraph [5] above. It was, as I have said, amended on 20 December 2006.

38 There is nothing to prevent a liquidator pursuing a course of action in respect of which he has made an unsuccessful attempt to obtain a direction from the court. But, of course, the examinations the SPL seeks by means of the interlocutory process are in respect of specified persons – not, as the application for directions had contemplated, in respect of “such persons as the SPL determines appropriate”.

39 As I have said, an affidavit was filed in support of the application for the issue of the particular examination summonses under s.596B but the persons represented by Mr Bathurst and Mr Pembroke have not seen it.

The applications by the PBL associates and the News associates

40 In the light of this perhaps over-extensive statement of background, I turn to the matter before me. In an immediate sense, the question for decision is whether the applicants represented by Mr Bathurst and Mr Pembroke should be given leave to be heard on the hearing of the SPL’s Part 5.9 applications, that is, the applications under ss.596A and 596B for orders for the issue of examination summonses; and that they be given access to the affidavit supporting the s.596B application.

41 The power of the court relevant to the first issue is conferred by rule 2.13(1) of the Supreme Court (Corporations) Rules 1999:

“The Court may grant leave to any person who is, or who claims to be:
(a) a creditor, contributory or officer of a corporation, or
(b) an officer of a creditor, or contributory, of a corporation, or
(c) any other interested person,
to be heard in a proceeding without becoming a party to the proceeding.”

42 An application under s.596A or s.596B is a “proceeding” for these purposes; and a person in respect of whom the issue of an examination summons is sought is, in that context, obviously an “interested person”. The rule is accordingly applicable and the question is whether the power it confers should be exercised in favour of the PBL associates and News associates the subject of the s.596A and s.596B applications.

43 In approaching that question, I should state some general propositions which I consider uncontroversial:

1. In the case of a person within the class described in s.596A, the court has no discretion to refuse the issue of an examination summons, provided that the evidence supports the claim that the person is within the class.
2. In a s.596B case, however, the court has such a discretion to exercise and must do so according to its assessment of the person’s ability to provide information about the company’s examinable affairs and the usefulness of that information in the due conduct of the external administration.
3. An application under s.596A or s.596B usually proceeds ex parte. I have already referred to provisions of the Supreme Court (Corporations) Rules dealing with that aspect.
4. According to the usual procedure, a person actually summoned for examination may apply to have the summons discharged. Abuse of process is a well-established ground for discharging an examination summons. As Mr Pembroke observed, however, it is suggested at paragraph 27.170.1 of “Ford’s Principles of Corporations Law” that the court can refuse to issue a summons where it appears that the application is an abuse of the court’s process.

44 As Mr Cotman SC pointed out on behalf of the SPL, these matters and other applicable principles are conveniently summarised at paragraph [10] of the judgment of Warren J (as her Honour then was) in Re Freshkept Technology Pty Ltd [2000] VSC 500:

“Before turning to the case at hand some general principles can be extracted from the authorities concerning compulsory examination:
(1) No notice of a summons for examination is required and generally notice should not be given: Re BPTC Ltd (No 1) (1992) 8 ACSR 736.
(2) The court should not direct the examiner to notify the examinee about the matters to be covered at the examination: Re Brash Holdings (1995) 15 ACSR 755, 767; 16 ACSR 324.
(3) An examinor may pursue an examination to identify property that would benefit persons entitled to it including under the terms of a deed of company arrangement: Re Brash Holdings , supra.
(4) In considering whether to order examination the court does not make final judgment about the prospects of success in an action that is the subject of the investigation unless it is so manifestly groundless that it must necessarily fail: Re Brash Holdings at 764.
(5) There must be full and frank disclosure by the examinor to the court upon applying for an order for the issue of a summons: Re Southern Equities Corp Ltd (1997) 25 ACSR 394.
(6) The powers of the court to order examination are extremely wide and the court is not bound in any way by the limitations found in earlier legislation: Flanders v Beatty (1995) 13 ACLC 529.
(7) An application to set aside an examination order on the ground that it is brought for an improper purpose must be made promptly and set up all objections in the one application: Bond v England (1997) 24 ACSR 472.
(8) The prevailing right or interest in the examination is the right of the public, particularly in public companies, and the rights of the creditors and shareholders: Re Cortaus Ltd (1996) 19 ACSR 591.
(9) It is proper for an applicant to conduct him or herself in a manner that is secretive and the applicant should not be asked to verify reasons for wanting an examination as the process is inquisitorial: Re Excel Finance Corp Ltd (1993) 10 ACSR 255, 263-4.”

45 The applicants seek to pursue a course quite different from the usual course. They say that it is not sufficient that they have an opportunity, after the event, to seek discharge of such examination summonses as may be issued (one could add “if any”, in the s.596B cases); and that the court should, in considering whether to issue the summonses, hear submissions from the potential examinees.

The arguments advanced by the PBL associates and the News associates

46 In taking that stance and contending that this case is exceptional, the applicants point to six matters. First, they say that some of the prospective examinees – specifically, Mr Green, Mr Miller and Mr Macourt – have already been extensively examined both by ASIC under s.19 of the Australian Securities and Investments Commission Act 2001 (with extracts made available to the One.Tel liquidators) and by the general liquidators under Part 5.9 of the Corporations Act.

47 Second, they point to the fact that the court, when appointing the SPL, took the view that the central question of solvency at the time of the cancellation of the rights issue in May 2001 was likely to be answered by findings made in the ASIC v Rich proceedings, with the result that the SPL was, as it were, instructed not to concern himself directly with solvency but to monitor ASIC v Rich to inform himself on that matter. The applicants accept that, as those proceedings have become more protracted, that thinking has changed to a certain extent. But the ASIC v Rich outcome is still seen as an important element in the SPL’s decision-making and, the applicants say, the general principle should remain that the SPL defers major investigative effort until after judgment is given in ASIC v Rich.

48 The third point made on behalf of the applicants is that the SPL’s position, from the point of view of instituting relevant proceedings within applicable time limits, can be accommodated by the proffered undertakings to the effect the CPH, PBL, News Limited and the PBL associates and News associates will not rely on any limitation defence if proceedings are commenced within six months after delivery of judgment in ASIC v Rich. The undertakings would include consent to a further order extending the s.588FF(3) period.

49 A fourth matter mentioned by counsel for the applicants is that it is not necessarily clear how a claim under s.588FF(1) could be maintained in relation to the cancellation of the rights issue. The provisions which, as it were, feed into s.588FF (that is, ss.588FA to 588FE) concentrate upon a concept of “transaction”. It is said that it is difficult, as a conceptual matter, to classify a decision to abandon or not to proceed with an unrealised proposal as a “transaction”.

50 The fifth point made on behalf of the applicants is that White J, as recently as November 2006, was not receptive to the proposition that the SPL should conduct examinations and declined to give a direction that the SPL would be justified in conducting such examinations as he considered appropriate.

51 Sixth, the applicants consider themselves to have been given an assurance that they would be heard if any and when any application for the issue of examination summons was pursued. They point to the following sentence in paragraph [30] in the judgment of White J of 26 April 2006:

“The affected parties are entitled to the opportunity to be heard before any further order is made in relation to examinations.”

52 I shall consider these arguments in turn.

First argument – prior examinations

53 The fact that someone has been examined before is not of itself any reason to think that a subsequent move to conduct an examination entails abuse of process. In a s.596A case, the court must issue a subsequent examination summons even where the examinee has been excused and discharged at the conclusion of a prior examination – subject, of course, to any proved abuse of process: see Re Shepherds Producers Co-operative Ltd (2006) 65 NSWLR 381.

54 Subsequent examination might be found to involve abuse of process if it were shown that the intention was to harass the examinee or to take him or her needlessly over old ground. But, as I say, it is not of itself objectionable.

55 In the absence of any evidence of any intention (or effect) of harassment, needless repetition or collateral motivation, there is no basis for thinking that abuse of process is involved in the SPL’s current proposal. Indeed, until the affidavit in support of the s.596B application is considered, the court does not know what the SPL’s purpose is.

Second argument – the solvency question can be left to one side

56 It is clear that the original intention, as reflected in Windeyer J’s decision of December 2003, was that the SPL should, to the maximum extent, avoid independent investigation of the question of solvency in May 2001 and be guided by the findings in ASIC v Rich on that matter. By April 2006, that intention had, of necessity, been modified. I need not repeat what I have said on this at paragraphs [27] and [28] above.

57 The situation today is one in which relevant assistance may in due course be obtained from findings in ASIC v Rich but the need for separate consideration of the solvency question cannot necessarily be seen any longer to be non-existent. Nor can continued monitoring of ASIC v Rich necessarily be seen as sufficient for the promotion and protection of the interests the SPL represents.

Third argument – the sufficiency of undertakings

58 Implicit in the third argument advanced on behalf of the applicants is the proposition that agreements or undertakings by them and their principals (CPH, PBL and News Limited) will be sufficient to overcome any time bar that the SPL may encounter in initiating any proceeding of the kind he is required by the terms of his appointment to investigate.

59 To the extent that any such proceeding involves causes of action affected by the Limitation Act 1969, that proposition is probably valid. Under s.68A of that Act, the benefit of extinguishment, by time, of the right and title to a cause of action to recover any debt, damages or other money does not accrue to a party unless the party pleads or otherwise appropriately claims the extinguishment. Effect can thus be given to an agreement not to rely on a time bar.

60 As regards any claim under s.42 of the Fair Trading Act, cases on s.82(2) of the Trade Practices Act (which is in terms identical with those of s.68(2) of the State Act) make it clear that the time bar arising under s.68(2) is procedural only and that it represents “a condition of the remedy rather than an element of the right”, to quote the words of the members of the Full Federal Court in Western Australia v Wardley Australia Ltd (1991) 30 FCR 245 at p.266. The parties have clearly proceeded on the basis that an agreement not to plead the time bar will be effective.

61 When it comes to any claim based on s.588FF(1) of the Corporations Act, however, the position seems to me – as it has apparently seemed to the parties – to be different. In that case, the parties have adopted a course that has seen an order made under s.588FF(3)(b) extending the period within which can application under s.588FF(1) “can only be made”. As a result of that order, the applicable period is now six years, rather than three years, after the “relation-back” day which, it is apparently accepted, was in May 2001. That period of six years will expire in something more than three months from now.

62 It is said on behalf of the applicants that this time factor does not represent any real barrier to the continuation of a regime based on undertakings. It seems to be acknowledged that the particular time bar is one that the parties cannot dispense with or agree to ignore, this being the force of the words “can only be made” in s.588FF(3). But Mr Bathurst submitted that the court has, even now, power to extend the period within which a s.588FF(1) application “can only be made”. This is because, on the approach Mr Bathurst advances, the order under s.588FF(3)(b) fixing a period longer than three years was an interlocutory order – or, at least, an order of the kind referred to in rule 36.16(3) of the Uniform Civil Procedure Rules 2005, that is, an order that did not determine any “claim for relief” or determine any question (whether of fact or law or both) arising on any “claim for relief”. That being so, it is submitted, that provision of the rules empowers the court to vary the order already made and the power of variation extends to allow the substitution of some period longer than that specified in the s.588FF(3)(b) order already made.

63 I have very strong doubts as to the correctness of that submission. The expression “claim for relief” is defined by s.3(1) of the Civil Procedure Act 2005. The definition, which applies also for the purposes of the Civil Procedure Rules, is as follows:

“’claim for relief’ includes:
(a) a claim for possession of land, and
(b) a claim for delivery of goods, and
(c) a claim for the recovery of damages or other money, and
(d) a claim for a declaration of right, and
(e) a claim for the determination of any question or matter that may be determined by the court, and
(f) any other claim (whether legal, equitable or otherwise) that is justiciable in the court.”

64 A claim for an order under s.588FF(3)(b) seems to me to be within paragraph (f) of this definition. A claim to have a period longer than three years made available for the initiation of an application or applications under s.588FF(1) is a claim justiciable in this court. Jurisdiction to determine the claim is conferred on the court by s.1337B(2) of the Corporations Act. This is because the claim is a “civil matter”, as defined by s.9, and arises under a provision of one of the pieces of legislation referred to in the s.9 definition of “Corporations legislation”.

65 It is pertinent to note that an extension order under s.588FF(3)(b) need not be confined to prospective proceedings concerning a particular person or transaction. The provision is concerned with not only a particularly proposed s.588FF(1) application (as in the present context) but also the situation where the identity of potential targets of s.588FF(1) applications is still being ascertained. This is made clear in the judgment of Spigelman CJ (with whom Mason P and Handley JA agreed) in BP Australia Ltd v Brown (2003) 58 NSWLR 322 at [168] – [170]. Section 588FF(3)(b) orders in terms not related to particular persons and particularly foreshadowed s.588FF(1) applications have been made in a number of cases: see, for example, McGrath v HIH Insurance Ltd (2004) 205 ALR 643; New Cap Reinsurance v Reaseguros Alianza SA [2004] NSWSC 787; Australian Securities and Investments Commission v Karl Suleman Enterprizes Pty Ltd (2004) 52 ACSR 103. This aspect of s.588FF(3)(b) emphasises the separateness of any application under that section from any s.588FF(1) application.

66 An application under s.588FF(3)(b) is not an interlocutory application in any proceeding. It is an application the object of which is to allow a liquidator more time within which to commence a proceeding. Once a proceeding has been initiated by the making of a s.588FF(1) application, there is no basis for the making of a s.588FF(3)(b) application in relation to the particular matter.

67 After a s.588FF(1) application is made and a proceeding is thereby instituted, the procedural regulation of the conduct of the matter is left to the procedural law applicable in the particular court – subject, however, to any other operation of provisions of the Corporations Act. So much is made clear at [32] of the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Gordon v Tolcher (2006) 231 ALR 582 to which Mr Cotman referred. Their Honours also emphasised, at [35], that an application under s.588FF(3)(b) for the fixing of an extended period “is a ‘matter’ distinct from that seeking an order with respect to the voidable transaction”, that is, the “matter” consisting of the s.588FF(1) application. This is emphasised by the circumstance that the s.588FF(1) function may be exercised by a wider range of courts than the s.588FF(3)(b) function.

68 In Gordon v Tolcher, at [39], the High Court expressly approved the following passage in the judgment of Spigelman CJ in BP Australia Ltd v Brown (above):

“ Section 588FF(3) does not have the effect of requiring all applications to be brought within a short period of time. It does, however, have the effect of requiring those who wish to keep open the option to do so, to determine that they do wish to do so within the three year period and to seek a determinate extension of the period. One thing that must be decided within the three year period is how long the process of deciding whether to pursue voidable transactions will take. Eventually, investigations to overcome deficiencies of information or the pursuit of funding must cease. Parliament has identified a reasonable time for such matters to occur, subject to a single determinate extension of time.”

69 For all these reasons, it seems to me that an order under s.588FF(3)(b) is an order that determines “a claim for relief” and is therefore beyond the power of variation created by rule 36.16(3). But even if the order were of the kind referred to in the rule, the clear recognition in BP Australia Ltd v Brown that s.588FF(3)(b) covers the field, so far as extension of the s.588FF(3) period is concerned, would seem to preclude the applicability of the rule in a case of the kind under discussion. I refer, in that connection, to the valuable analysis by Debelle J in Davies v Chicago Boot Co Ltd (2006) 58 ACSR 505. As his Honour’s judgment shows, the approach taken in Rodgers v Commissioner of Taxation (1998) 88 FCR 61 (a case on which Mr Bathurst expressly relied) has been overtaken by BP Australia Ltd v Brown. The subsequent endorsement of relevant aspects of the BP Australia decision by the High Court in Gordon v Tolcher seems to me to confirm the correctness of Debelle J’s approach.

70 These considerations concerning s.588FF(3) indicate that it would be most unsafe for the SPL to contemplate that some consensual regime could be effective to preserve beyond May 2007 the full opportunity of the SPL to pursue all viable causes of action that may have accrued to One.Tel and its liquidators from the cancellation of the renounceable rights issue – assuming, of course, that an application under s.588FF(1) can be seen to be among those viable causes of action.

The fourth argument – no evident “transaction”

71 This assumption is challenged in the next part of the applicants’ arguments. The concept of “transaction” central to the provisions contribution to the s.588FF jurisdiction has been recognised as being a very wide concept. The relevant case law was recently collected and discussed by Hamilton J in Kalls Enterprises Pty Ltd v Baloglow [2006] NSWSC 617. One of the points his Honour made is that a number of separate dealings may constitute a transaction.

72 That an outside observer cannot, with ease, see a transaction in a particular factual context is therefore unremarkable. In any event, one would expect that, if and to the extent that the SPL had in prospect the possibility of making a s.588FF(1) application by reference to a particular “transaction” and sought to conduct s.596B examinations to that end, he would provide in his s.596C affidavit at least some preliminary explanation of the possible “transaction” requiring investigation.

The fifth argument – White J’s decision of 28 November 2006

73 It is true that White J declined on 28 November 2006 to give the SPL a direction that he was justified in undertaking such Part 5.6 examinations as he considered appropriate. I have quoted paragraph [33] of his Honour’s reasons where the basis for the refusal are stated. He referred on several occasions to lack of specific evidence as to the need for examinations.

74 Now, of course, the SPL has, of necessity, filed an affidavit which, it must be assumed, shows the reasons why the SPL considers the particular s.596B examinations to be necessary or desirable. One may surmise that the same reasons are relevant to the s.596A application. The information that White J found to be lacking will almost certainly be found in that affidavit. If it is not – or if the information does not show a sufficient basis for orders under s.596B – the attempt to secure examinations under s.596B is likely to fail. And any such failure may well rebound also on any summons issued under the mandatory provisions of s.596A.

75 In short, the SPL’s Part 5.9 application by way of the amended interlocutory process filed on 20 December 2006 will be considered by reference to evidence beyond that which was before White J on 28 November 2006.

The sixth argument – assurance of an opportunity to be heard

76 The sentence in White J’s judgment of 26 April 2006 quoted at paragraph [51] above does not, in any sense, represent an assurance that the present applicants will be heard before any examination summonses affecting them are issued. It is no more than a reflection of part of the undertakings given at that time.

77 The undertaking involving CPH/PBL was expressed to be subject to condition (c) set out at paragraph [19] above. There was a corresponding condition in the News Limited undertaking.

78 Paragraph (iii) of this condition (c) contemplated the possibility that there would be an order resulting in the examination of relevant persons and that the affected persons would have an opportunity to be heard. But that paragraph (iii) did no more than identify one event pending which the SPL was not to seek to examine relevant persons, at least if condition (c) was to continue to be satisfied so as to support the consensual regime with respect to extension of or non-reliance on time bars. Another such event (that provided for in paragraph (ii)) was the start of the period of six months immediately before the expiration of the extended limitation period. That paragraph (ii) event has now occurred. It follows that, because of the happening of the paragraph (ii) event, moves by the SPL to examine relevant persons are no longer inconsistent with condition (c) and that paragraph (iii) of that condition no longer has any operative force or relevance.

79 In summary, the court has never indicated that the present applicants would be afforded an opportunity to be heard on any application by the SPL for the issue of examination summonses; nor, as things now stand, do arrangements presently prevailing between the parties purport to afford any such assurance.

Conclusion

80 The SPL now finds himself in a situation where, at least according to the analysis at paragraphs [63] to [69] above, time is running out, so far as initiation of any s.588FF(1) proceeding is concerned. The timing imperatives to which he appears to be subject in that respect will not allow him to await the outcome in ASIC v Rich before making a decision whether to commence such a proceeding. Nor, because of s.588FF(3), can matters be safely dealt with by inter partes agreements.

81 In those circumstances, the court should proceed at once to consider the applications made by the special purpose liquidator under ss.596A and 596B. Nothing the applicants have put forward suggests any ulterior purpose or any need for those applicants to participate in the hearing of the SPL’s applications. The applications should be dealt with by the court in the usual way, that is, upon the ex parte application of the SPL.

82 The applicants’ application for access to the s.596C affidavit is premature. The outcome of the s.596B application may be that no examination summonses are issued. In that event, there will be no point in granting access to an affidavit containing what the SPL may still regard as confidential and sensitive information. The appropriate course at this point is to dismiss the application for access to the affidavit but to make it clear that this will be without prejudice to the right of any person upon whom an examination summons is in due course served to make a like application by reference to circumstances then prevailing.

83 I make the following orders:

1. Order that the interlocutory process of Martin Green and Darren Miller filed on 29 January 2007 be dismissed with costs.
2. Order that the interlocutory process of News Limited, John Hartigan, Peter Macourt and Ian Philip filed on 29 January 2007 be dismissed with costs.
3. Order that the amended interlocutory process of Paul Gerard Weston filed on 20 December 2006 be stood over to 9.30am tomorrow, Thursday, 15 February 2007 before me.

Postscript

84 I would make one final comment. The court is conscious of the very large sums of money that have been expended by the SPL, particularly on legal fees. For reasons canvassed in my judgment of 15 August 2006 (Onefone Australia Pty Ltd v One.Tel Ltd (2006) 58 ACSR 466), it is inappropriate that the principal liquidators have any oversight of expenditure by the SPL. In a judgment of 20 December 2006 (Onefone Australia Pty Ltd v One.Tel Ltd [2006] NSWSC 1447), White J observed that the SPL, because of his confined and particular responsibilities, does not have the ability a liquidator usually has to prioritise tasks and channel resources accordingly. His Honour said (at [8]):

“He [that is, the SPL] does not have the same perspective of the overall administration of One.Tel as do the general liquidators. He is therefore not in as good a position as would be a liquidator in the usual course of administration to decide whether moneys spent on legal costs and disbursements in investigating potential causes of action relating to the cancellation of the renounceable rights issue would be moneys well spent.”

85 White J then referred to the role that the committee of inspection had been playing and the assistance the court would derive from knowing the committee’s attitude to expenditures by the SPL:

“10. As a matter of practice, the special purpose liquidator has been providing the members of the Committee of Inspection with at least summaries of the legal expenses incurred, and has provided the members of the Committee with a budget of future expenditure on legal costs. The Committee has de facto assumed a greater role in overseeing such expenditures than would normally be the case.

11 It is not appropriate that the special purpose liquidator be required to make repeated applications to the Court for approval of his funding. Such applications themselves carry costs. Nor is the Court in a position to make an informed assessment as to the appropriateness of the expenses.

12 It appears to me that, by default, the Committee of Inspection should perform the role, in the particular circumstances of this case, of considering the appropriateness of the special purpose liquidator's expenditure on legal costs.”

86 I mention these matters now because it may well be relevant for the court to be made aware, upon the hearing of the SPL’s Part 5.9 applications, of the committee’s attitude to the expenditure of funds on the particular examinations. I am aware from the evidence (see paragraph [32] above) that the committee of inspection expressed a view with respect to the general matter of examinations by the SPL before the SPL made the application for directions disposed of by White J’s judgment of 28 November 2006. But, as things now stand, it is not clear whether that view extends to the particular examinations to which the SPL’s amended interlocutory process of 20 December 2006 relates.

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