Pilmer & Ors v The Duke Group Limited (In Liquidation)

No judgment structure available for this case.

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A2 of 1994
B e t w e e n -
ANGUS CLAYMORE FILMER, ALAN
ROBERT CRAWFORD, DOMENIC
VINCENT MARTINO, PAUL THOMAS
CAMBAGE WENHAM, RONALD
WILLIAM ARNOLD, AUSTIN
FREDERICK GRELLMAN, BRUCE
KENNETH SIMMONS and GRAHAM
ROBERT ASHBY

Applicants

and
THE DUKE GROUP LIMITED (IN
LIQUIDATION)

Respondent

Application for a stay

Filmer

18/2/94

DAWSON J

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 FEBRUARY 1994, AT 2.20 PM

Copyright in the High Court of Australia

MR J.R. MANSFIELD, QC:

May it please the Court, I appear

with my learned friend, MR J.P. DE RUVO, for the
applicants. (instructed by Phillips Fox)

MR T.A. GRAY, QC:

May it please the Court, I appear with my

learned friend, MR S.J. LIPMAN, for The Duke Group
Limited (In Liquidation). (instructed by Fisher
Jeffries)

HIS HONOUR:

Now, Mr Mansfield, who are the parties?

You

appear for a number of people who are, in fact,
either national members or Western Australian
members of the partnership?

MR MANSFIELD:	Yes, that is so, Your Honour.
HIS HONOUR:	Accountants, yes. And the record shows that,

does it, now?

MR MANSFIELD:

Yes, Your Honour.

HIS HONOUR: Is The Duke Group (In Liquidation) the right

defendant or is it the Liquidator?

MR MANSFIELD:

It appears not, if Your Honour pleases. The

proceedings in the Supreme Court of South Australia
were conducted in this name but technically the
order for examination under section 596B was
procured by the Liquidator personally rather than
by the company of which he was the Liquidator. Technically, the application for special leave
and so this proceeding generally should be with the
Liquidator in person as the respondent rather than

the company in liquidation. We must, at an
appropriate time, make an application to the Court
for him to be substituted as the party under
Order 16.

HIS HONOUR: Well, now seems to be the perfect time.

MR MANSFIELD:

I will make an oral application, if the Court

pleases.

HIS HONOUR:	What do you have to say about that, Mr Gray?
MR GRAY:	We oppose that application, if the Court pleases.

There is a bit of a history of this matter if I
might explain it to Your Honour. The action in
which the winding up order was made was Gerah
Imports, the petitioning creditor, against The Duke
Group. That is the action in which the Liquidator
then made application, pursuant to section 596B of
the Corporations Law, to examine, which gives him
the right to do so, in his own right as Liquidator,
and he obtained an order -

HIS HONOUR: In those proceedings?

Pilmer

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18/2/94

MR GRAY:	In those proceedings.
HIS HONOUR:	Why is it in those proceedings.
MR GRAY:	His liquidation, as a court appointed liquidator,

takes place within those proceedings and whenever
he applies for directions with regard to any
matters or orders for examination, he does so
within those proceedings.

HIS HONOUR:

You could have no objection to his being added,

could you?

MR GRAY:

The difficulty, if the Court pleases, is that The

Duke Group (In Liquidation) cannot be proceeded against without leave of the Court by reason of
section 471 of the Corporations Law and these

purported proceedings are simply incompetent. Now,
this is a point that we wrote, on 25 January,
having received these papers, and advised my
learned friends of, saying, "Have you got leave to

issue these proceedings?" On 27 January, the
response came, "We don't need leave because the
intended respondent is John Sheahan, the

Liquidator. Do you consent to an amendment?" To
which the response went on 27 January of this year,
"You haven't shown us the reasons for what has

happened. We aren't in a position to consent. If
you provide to us reasons, we will reconsider the

matter." We have not heard since.
In the letter of 27 January, when they advised

that they wanted to take the action against
John Sheahan, they said if they did not hear from us within 24 hours they would issue an appropriate notice to obtain an order.
Now, the point that we take is this, if the

Court pleases, that these proceedings are and have
been, since institution, incompetent and we have
maintained that position both in

correspondence - - -

HIS HONOUR:

What about the proceedings in the supreme

court? They were in the form of - - -?

MR GRAY:

They were within the liquidation proceedings.

This is not a case, if Your Honour pleases, of

simply the wrong heading being used. An entirely
new heading has been created for the purposes of
the special leave application. It happens to be
one that is incompetent because it purports to be a
proceeding against a company in liquidation without
leave being obtained.

HIS HONOUR:	Who can give leave?
Filmer	18/2/94
MR GRAY:	Only the supreme court or a Federal Court - this

Court does not have jurisdiction to give leave - by
reason of the definition sections under the
Corporations Law.
So, Your Honour, we say, in fact, this is not

a case of misnomer and this Court dealt with that
rather knotty problem in the Bridge Shipping Pty
Ltd v Grand Shipping, (1992) 66 ALJR 76. This is
not a case of misnomer. This is a case of the
wrong party being sued and it is a case - - -

HIS HONOUR:

Who do you say the right party is? The

Liquidator or - - -?

MR GRAY:

The Liquidator personally because it is he,

personally, who has the right to seek to examine.
He is the eligible person to make application under
the Corporations Law, and that is what, in fact,
happened. So, what we have is an entirely
irregular purported application and, if not a case
of misnomer, it is a case that is fundamentally
wrong.

HIS HONOUR:

But you are not taken by surprise at all, are

you, in any way?

MR GRAY:

No, and nor are my friends.

We wrote to them on

25 January and raised the point on our initiative
with them so that they could take whatever steps
they thought were appropriate.

HIS HONOUR:

You say I simply cannot give leave to add

the -?

MR GRAY:

No, Your Honour cannot, in our respectful

submission. This is a point that we raised with
them immediately on receiving the papers, drew to
their attention and they wrote to us saying they
did not need leave and that they would issue an
application within 24 hours, if there was no

consent, to amend, and they have done nothing
since.

HIS HONOUR:	What are my powers to correct the situation?
MR GRAY:	Your Honour is, with respect - -
HIS HONOUR:	Powerless?
MR GRAY:	Your Honour, with respect, is powerless in these

proceedings. These proceedings, by law, cannot
proceed.

HIS HONOUR:	What is the section of the - - -?
Filmer	18/2/94

MR GRAY: It is 471B. It is in the back of the book of

authorities that we have provided to Your Honour
and a list to my friend, behind card 12, four pages
in, at the foot of the page.

HIS HONOUR:

I have got something headed "The First

Schedule".

MR GRAY: It is headed "External Administration" and it shows

471 at the top and 471B at the bottom.

HIS HONOUR:

I am sorry, I have got the wrong tab.

Tab 12,

you said?

MR GRAY:

I am sorry, Your Honour, behind tab 14, four pages

in - a misnumbering problem.

HIS HONOUR:

Yes.

MR GRAY: Section 471B is at the foot of the page, and if I

could read the relevant words:
While a company is being wound up ..... by the
Court ..... a person cannot begin or proceed
with:
(a) a proceeding in a court against the
company .....
except with the leave of the Court -

and "the Court", if I could pass to Your Honour the
definition section, is defined to mean "the Federal
Court, or the Supreme Court".

HIS HONOUR:	The preceding definition mystifies me.
MR GRAY:	Yes, but this is a capital "C" in section 471B,

the second line, Your Honour.
Can we say, if Your Honour pleases, that if

an application to substitute or amend is made,
rather than the issue of new proceedings, which we

opposed because it would be to seek to substitute say is the proper course to be taken, it would be in an "out of time" action and when the Court comes
to consider this application being out of time, it
is our case, if Your Honour pleases, that a
deliberate decision was made to wait to the last
day to issue the application. The intention was to
issue it on the twenty first day because of certain
commercial advantages that follow from the delays
in the matter. In fact, apparently, there is an
affidavit of an article clerk, saying that she
miscounted.
So, it is a case where a party has elected to

seek to advantage itself by going on the last day
and then miscounting and we say in that

Pilmer

18/2/94

circumstance this Court would not grant an
extension when the Court understands the history of
the matter, which we are happy to go into, and
understands what delays have occurred, what "delay"
means in this case and what my client has been
seeking to do in regard to substantive proceedings

that are being delayed by this matter. When that
full history is known, there would be no extension
of time.

HIS HONOUR:

I suppose the first thing is to find out

whether I do have power to do anything anyway?

MR GRAY:

Yes.

Your Honour, we, as Your Honour will have

noted, have raised the point in the final point in
our written argument - we identify the point - and
it goes to jurisdiction, so it must be raised. We
have addressed, of course, the merits so that the
Court will see that we are prepared to argue the

merits if required. But we do say Your Honour has
no jurisdiction.

HIS HONOUR:	Perhaps I will hear from Mr Mansfield on this.
MR MANSFIELD:	If Your Honour pleases, there are two answers

to what my learned friend puts. One is that the
proceedings are not simply a nullity in a relevant
sense and Your Honour would be aware, as my learned
friend, no doubt, will acknowledge, that courts
frequently give leave to proceed nunc pro tune well
after the step is taken against a company in

liquidation. So that the proceedings are not
themselves simply non-existent in a legal sense.

HIS HONOUR:	But I cannot give leave, can I?
MR MANSFIELD:	No, Your Honour, but what we do ask

Your Honour to do is to add a party under Order 16
rule 4 of the Rules which says that:
A proceeding shall not be defeated by reason

of misjoinder or non-joinder of parties, and the Court or a Justice may deal with the
matter in controversy so far as regards the
rights and interests of the parties actually
before it or him.

So that whilst Your Honour cannot give leave
itself, it does not mean that the proceeding is a
nullity in the sense of just not existing, and
given the existence of a proceeding, in our
respectful submission, Your Honour, under Order 16
rule 4, should simply join Mr Sheahan, or give
leave to join Mr Sheahan as a party.

HIS HONOUR:

But if one goes to section 471B:

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a person cannot begin or proceed with:
(a) a proceeding in a court against the
company .....

except with the leave of the Court - Why is not this proceeding with "a proceeding
against the company"?

MR MANSFIELD:

Your Honour, in our respectful submission,

the proceeding, having started in a practical
sense, the Court could give leave to have commenced
it and maintain it nunc pro tune.

HIS HONOUR:	A court could but I cannot.
MR MANSFIELD:	No, Your Honour, but for the purposes of

saying that there is simply no proceeding, that
section, in our respectful submission, does not say
anything. It simply says that, technically, we are
not entitled to have done that which we have done,
that is, to start the proceeding and to maintain

it. The courts, from time to time, in those
circumstances, have simply declined to allow the
action to proceed in the absence of an application.

HIS HONOUR: But why is not this application proceeding with

the proceeding?

MR MANSFIELD:

Your Honour, our first application is to join

Mr Sheahan under Order 16 rule 4 as a party and if
he be joined, then to proceed with the application
today.

HIS HONOUR:

But that really would not be a joinder of

Mr Sheahan, would it? I am sorry, let me put it
this way: it would amount, in effect - what you
would have to be doing is substituting Mr Sheahan
for the company because whilst the company remains
there then it is a proceeding against a company
which is without leave of the Court and you cannot

proceed with it.

MR MANSFIELD:

Your Honour, we cannot proceed with the

proceeding then in so far as it is against the
company but we could proceed with the proceeding in
so far as it was against Mr Sheahan.

HIS HONOUR:

That is why I say what you are really seeking

to do is to substitute Mr Sheahan for the company,
are you not?

MR MANSFIELD: That is the practical effect of it,

Your Honour.

HIS HONOUR:	How can you do that?
Pilmer	18/2/94
MR MANSFIELD:	Because, if Your Honour accepts the

proceeding was instituted without the joinder of
Mr Sheahan, and it should have been instituted with
Mr Sheahan as the party, if Your Honour joins
Mr Sheahan, we would be left with two parties, one
of whom we would not be entitled to proceed

against in the absence of an order. But that party
can either be struck out or we simply do not
proceed with it. But once Mr Sheahan is a party,
it is a proceeding between the applicants, on this
application, and Mr Sheahan.

HIS HONOUR:

But can I do that in the absence of any process

bringing Mr Sheahan before the Court?

MR MANSFIELD:

In our respectful submission, Your Honour

can

HIS HONOUR:

The rule is - - -?

MR MANSFIELD: It is Order 16 rule 4.

HIS HONOUR: That requires then service of the amended

process upon a party whose name is added, does it
not?

MR MANSFIELD: Yes, it does, Your Honour, formally.

If my

friend does not acknowledge and appear for
Mr Sheahan in those circumstances today, we would
be making an application ex parte until we had the
opportunity to be served and presumably we would

have to come back with a further application. I am
not sure if Your Honour made that order that he
would not - perhaps I should not say that. That he
may not object to having the argument today with
Mr Gray representing him. If Your Honour pleases,
that is the first application that we have to make,
the point having been taken.

MR GRAY:

Your Honour, we say that the step of entertaining

this application made orally without notice is a

step in the proceedings and cannot be taken by
reason of section 471B.
Your Honour, we say further that this is a

different application than the one that we had been
told of before. Could I pass to Your Honour the
correspondence that has passed on this issue, being
the letter of Fisher Jeffries to Phillips Fox of
25 January, and the reply of Phillips Fox of
27 January, in which we were then advised, if
Your ionour pleases, of an application to a consent
to an amendment of the name, and then the letter of
28 January, in which my client's non-consent was
indicated.

Pilmer

18/2/94

Your Honour, our position is this that we have

maintained, since that exchange of correspondence,
that the two purported applications for special leave that have been issued are incompetent and
when we have said to the Court that we are prepared
to consent to the matter proceeding in Hobart - we
understand there is a possibility that a special
leave hearing could be heard, we have specifically
said we consent to a competent application being
heard then because, Your Honour, there are major
public policy reasons that lie behind section 471B
in regard to the preservation of a company in
liquidation remaining assets and the Liquidator, of
course, cannot be seen and cannot legally involve
himself in proceedings that are contrary to the
statute against the company in liquidation.

HIS HONOUR:

Mr Gray, this is an application for leave to

appeal from a judgment of the Full Court, is it
not?

MR GRAY:	Yes, of December last year.
HIS HONOUR:	And those proceedings were in the name of the

parties to the liquidation?

MR GRAY:	Yes, Gerah Imports
HIS HONOUR:	Why is that not the correct title?
MR GRAY:	Your Honour, that action was Gerah Imports v The

Duke Group Limited and then there are various rights between individuals are taken within those
proceedings. So, one would have a title, if
Your Honour pleases, in the main action, Gerah
Imports v The Duke Group Limited and between the
examinees, the subject of an order, and Sheahan as
the Liquidator.

HIS HONOUR:

Yes.

I am not kindly disposed to what are

really Emily Post points in something like this
because, after all, there was a proceeding in the

supreme court below; this is an application for
leave to appeal from a judgment that was given in
those proceedings and either there was a correct
description of those proceedings there or there was
not. You do not dispute that that was a sufficient
description of the proceedings, that the parties
were not sufficiently identified in the proceedings
below, do you?

MR GRAY:

No.

The difficulty has arisen because my learned friends have changed the heading to - - -

HIS HONOUR: Well, that is all it is, is it not?

Pilmer	18/2/94
MR GRAY:	No, it is not, because it has had the effect of

bringing, as a party before the Court, The Duke
Group (In Liquidation), and that is the difficulty.

HIS HONOUR:

I am not sure that I follow that. There is no

doubt that this is an appeal from the judgment of
the Full Court, is there?

MR GRAY:

There is no doubt that that is what it is intended

to be. We accept that.

HIS HONOUR:

And if the description of the parties is wrong,

there is no doubt about who the actual parties are?

MR GRAY:	There is no doubt about who the parties should be.
HIS HONOUR:	Which are the same parties as were before the

Full Court.

MR GRAY:

Yes, and the difficulty is that in actual fact

they have named the wrong party as respondent and
the action is incompetent, and we wrote to them a
month ago - - -

HIS HONOUR: Now, that is what I do not understand.

If, in

fact, it is perfectly clear from the proceedings
otherwise that this is an appeal from proceedings
which are identified differently in the supreme
court, it is merely a matter of misdescription.

MR GRAY:

Your Honour, we would say it is not a case of

misnomer because there has not been - I mean, for
example, it is not a case - - -

HIS HONOUR: It is a case of misnomer, is it not? If this

is an appeal from proceedings in the supreme court, it is an appeal by the parties in those proceedings
or under their names, anyway.

MR GRAY:

Yes.

I do not want to parry with Your Honour but

we say plainly the examinees intended to seek to

review that Full Court decision and we accept that.
Your Honour, our only problem when we got the
papers naming the company in liquidation was to
point out immediately that it was an incompetent
proceeding.

HIS HONOUR: Let me ask you this: were the applicants, the

actual applicants in the proceedings below,

incompetent to make the application they did under
the then title of the proceedings which was the
petitioning - - -

MR GRAY:	The Gerah company?
HIS HONOUR:	Yes.

Filmer

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MR GRAY:

No, the examinees, if I can call them that, they

had a right to seek to review the order for
examination made against them. There is no
question about that at all.

HIS HONOUR:

Then it is simply a case of misdescription in

title.

MR GRAY:

Your Honour, once one enters into the thick of

those cases, it is very difficult to deal with
them - - -

HIS HONOUR:

I do not think it is difficult in this instance

because it is quite plain that the applicants are
seeking leave to appeal from a judgment made by the

court below. The judgment made by the court below
was made in proceedings which were entitled in a particular way. Now, there can be no doubt what was intended.

MR GRAY:

Your Honour, we repeat, we do not quarrel with

that at all. Our point is that - - -

HIS HONOUR:

What I am putting to you: this is not a

separate proceeding in the sense that it is an
appeal from a judgment which has been given in the
proceeding.

MR GRAY:

Your Honour, we say the correct approach in law is

that they simply issue proceedings between the

right parties and then the matter can proceed. We
do want to take a bare technicality for a moment
but our difficulty is that these proceedings assert
the respondent to be the company in liquidation.
They seek an order in regard to that company by way
of costs, and the Liquidator immediately writes -
has his solicitors write to them pointing this out.

HIS HONOUR:	I follow that.
MR GRAY:	And then, if Your Honour pleases, nothing happens.

Then, Your Honour, what we are faced with today is

an oral application of a different kind - it is now
for joinder rather than amendment - and we have
nothing to support it and we are not in a position,
if Your Honour pleases, to say to Your Honour,
"Your Honour would not allow this order because it
will be to deal with an application that is out of
time on which there is no", we say, "case made out
for an extension of time", because the Court would
not lend itself to a substitution in terms of an
application that would be bad because it is out of
time and, when that matter is dealt with, an
extension would not be granted.
Your Honour, we just have not, having tried to

have my friends bring this point forward really on

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notice, and then they just simply do not do what they say, we say it is quite unfair then without

notice to expect us to argue the matter fully. It
is a point that we have repeated to the courts
below, that we say that this matter is not
competent.
So, in our respectful submission, if my

friends want to make an application to substitute
because of misnomer, then they have to show the
bona fide mistake that occurred and satisfy the
usual test, that it is a case of misnomer and not
simply - - -

HIS HONOUR:

I think I am not making myself clear. Whatever

may appear in the heading of the application, in
the body of the application it is perfectly plain
that it is an application for special leave to

appeal from a judgment in the court below. You
take no exception to the parties in the proceedings
in which the judgment was given and I do not know
how the matter got to the present state but it
really is a prime case of misdescription, is it

not? How you can have different parties in an
application for special leave to appeal, I do not
know, but the application is a different one at the
moment, anyway.

MR GRAY:

Yes.

Your Honour, when one goes back to those

cases that lie behind the Bridge Shipping case, the
Rainbow case and the other cases that are referred
to, they seem to draw a fairly clear line between a
person who, for example, misnames a company, leaves
out part of the heading - - -

HIS HONOUR:

I follow those cases but that is where, in

fact, the parties were intending to seek relief
against particular persons. Now, here the relief that is being sought, or for which an application for special leave is sought, is in relation to a
judgment which is given in proceedings in which the
parties were correctly described; an entirely

different situation.

MR GRAY:

Yes.

Your Honour, we thought that perhaps the

case that was closest to this on the authorities
was one of the cases cited by Your Honour in the
Bridge Shipping case, the English case of Central
Insurance v Seacalf, otherwise "Aiolos" which was a
case where an insured rather than the insurer sued.
Your Honour, we say that is very close to the
situation here where the company in liquidation is
sued rather than the liquidator in his capacity
not as agent of the company but in his capacity as
officer of the court.

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HIS HONOUR: That is in initiating proceedings. This is not

an initiating proceeding, this is an appeal
proceeding or an application for special leave to
appeal.

MR GRAY:

It is, but as far as the company in liquidation is

concerned, it is an initiating proceedings. This
is the first time the company in liquidation
becomes a party to anything.

HIS HONOUR:

The company was not in liquidation in the court

below. It must have been.

MR GRAY:

The company went into liquidation well before this

application was made.

HIS HONOUR:

The proceeding in the court below was against

The Duke Group?

MR GRAY:

The proceeding in the court below was by the

Liquidator, John Sheahan, who issued a
summons - - -

HIS HONOUR:	Yes, but the heading of the proceedings.
MR GRAY:	The heading of the action was Gerah Imports v The

Duke Group Limited.

HIS HONOUR:	(In Liquidation)?
MR GRAY:	No. That is the creditors' action pre-winding up

and it simply remains as - - -

HIS HONOUR:

I see, yes, I follow that.

MR GRAY:

- - - Gerah Imports v The Duke Group.

Then, as a

matter of jurisdiction, the Liquidator, in his own right and in his own name, issues a summons within those proceedings to exercise his powers as an
eligible person under 596B and he then has the
examinees served and they then argue the matter out

within the framework of that other action. But

The Duke Group (In Liquidation) is never a party to
the proceedings. So, for the first time these
proceedings are issued; they make The Duke Group
Limited (In Liquidation) a party and seek an order for costs against it.

HIS HONOUR:

And, clearly, it would seem that that cannot

stand.

MR GRAY:	No.
HIS HONOUR:	But what is clear is that, there having been a

judgment in proceedings which were not incorrectly
entitled in which the parties were not incorrectly

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identified, the applicants seek special leave to
appeal against that judgment.

MR GRAY:

Your Honour, we have known since 24 December, the

day after the judgment was handed down, that the
examinees wish to have that judgment reviewed and
the affidavit that they have filed that appears in
the application book discloses that they had
instructions on the morning of the judgment to seek

leave. We also know, if Your Honour pleases, that
they elected to leave it to the last day, as they
thought, to lodge -

HIS HONOUR:

That may be, Mr Gray, but can I put it to you

this way: the fact of the matter is that these
proceedings are proceedings by way of an appeal
from a judgment.

MR GRAY:	Yes.
HIS HONOUR:	The judgment is in a matter in which the

petitioning creditor and the company are parties.
You do not take any exception to those being the
parties?

MR GRAY:	No.
HIS HONOUR:	And if the applicants in the court below could

make the application they did then, presumably,
that is the application they can make here or an
application related to it.

MR GRAY:

But their application is not to retitle this

matter Gerah v The Duke Group Limited. Their
application is to make it an application against
John Sheahan.

HIS HONOUR: Their intention is to appeal against the

judgment.

MR GRAY:

Yes. I repeat, Your Honour, we have known about

that since 24 December when they told us at the

Master's hearing. Our concern has been that they
have elected to adopt a procedure that is
incompetent and that leaves Your Honour with no
jurisdiction.

HIS HONOUR:

They have misdescribed the proper parties.

Now, why is it not a case of misdescription?

MR GRAY: Because, if Your Honour pleases, it is not a case,

for example, of their having said, "We want to sue
John Sheahan" and calling him "Jonathan Sheahan" or
"Jonathan Sheahan Pty Ltd" where there is no doubt

who they wanted to proceed against. They wanted to
proceed as they have against The Duke Group (In

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Liquidation). They got it wrong. They made a
mistake about the party to be sued.

HIS HONOUR:

It is not a question of the party who sued, it

is an application to appeal against a judgment and
the judgment is in relation to certain parties
which are there.

MR GRAY:

They made a mistake not of getting the name of the

party against whom they wanted to appeal - it was

not a case of misnomer. They actually made a
mistake about who they should appeal against. So,
it was a case of getting the wrong entity and they
brought the wrong party before the court.

HIS HONOUR:

I think we are going over the same ground.

MR GRAY:

Yes, Your Honour, I cannot advance the matter.

We

say that to take any step in this proceeding as
presently constituted would represent going
contrary to the mandatory statutory injunction that

the Court cannot. We take it not as a bare
technicality because Your Honour knows when we come
to face an application for substitution, we will
resist that on the merits and want to put material
before the Court as to why.

HIS HONOUR:

Very well.

Mr Mansfield, what do you say?

MR MANSFIELD:

If Your Honour pleases, having heard what my

learned friend was putting to Your Honour in
argument, rule 3 of Order 16 also, in our
respectful submission, seems to apply because he,
in effect, paraphrased what had happened in terms
of rule 3.
Where ..... it is doubtful whether it has been
commenced in the name of the right plaintiff,
the Court or a Justice, if satisfied that -
(a) it has been commenced through a bona fide
mistake; and

(b) it is necessary for the determination of
the real matter in dispute so to do,
may order another person or persons to be
substituted or added -

Now, Your Honour is quite correct. What is
intended in this application for special leave to appeal is to appeal from the decision of the Full
Court in which the personal applicants presently
were ordered to be examined by the Liquidator, or
on behalf of the Liquidator personally, but the
order was made in the action in the supreme court
between Gerah Imports and The Duke Group and that

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heading, if Your Honour pleases, is the heading of
the order sought to be appealed from which is
exhibit 1 to the affidavit in support of the
particular summons before Your Honour.

HIS HONOUR:

What is your present application?

MR MANSFIELD: That having heard what has occurred, in our

respectful submission the proper heading should
adopt the supreme court heading which is exhibit 1,
and it should then be an application for special
leave to appeal with that heading, but making it
plain in the body of the summons that the order
sought is in the name of the persons who are called
the examinees against Mr Sheahan, who is the
Liquidator. If Your Honour pleases.

HIS HONOUR:

Yes, very well.

Do you have anything to add,

Mr Gray?

MR GRAY:

Your Honour, if my friend is now electing to

proceed under Order 16 rule 3, we say that that is
opposed for the same ground that it would involve a
step in the proceeding under 471B, and Your Honour
has no jurisdiction to take that step. Further, if
Your Honour pleases, that this rule, Order 16 rule
3, picks up on the old English rule and makes it
very plain that what the applicant must do is
satisfy the Court that he always intended to bring
his appeal against that entity, whatever it might
be, but got the wrong name. That test just cannot
be met in this case because whoever put their mind
to bringing the appeal against the company in
liquidation did not think it was John Sheahan.
They have actually gone out and got the wrong
party.
So we say it is incumbent on my friend,

if he makes that application, to put forward an
affidavit that explains exactly what did happen and
then we can deal with that, whether we accept that

or not, and we can then bring on other information that we would say would be relevant as to why the Court would not exercise its discretion under an
application of Order 16 rule 3 and put to
Your Honour all the matters that go to what we say

is a deliberate delay in this matter. And
Your Honour would then weigh that on the - - -

HIS HONOUR:

I should put this to you:

it is perfectly

apparent what happened. It is perfectly apparent
who the parties were to the proceedings below.
This is an appeal in those proceedings. It does
not need an affidavit to establish that, does it?

MR GRAY:

Your Honour, it is on this question about whether

in fact somebody, for example, went out and said -

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to use an analogy - "I want to sue Joe Bloggs" and
getting the wrong person, when he wants to sue

Joe Smith. Now, if that is the case -

HIS HONOUR:

But it is not because it is not an initiation

of proceedings but an application in proceedings
that are already on foot.

MR GRAY: That is why, if Your Honour pleases, we say -

Your Honour, I will not repeat it. Your Honour has
our point. But, Your Honour, we do wish to be
heard in regard to the merits of that matter in
regard to delay.

HIS HONOUR:

Yes; merits of what matter?

MR GRAY:

The merits of an application to substitute.

We

say that the Court would not exercise its
discretion under Order 16 rule 3 in this case in
addition to the reason it has no jurisdiction to
move at the moment at all but, secondly, because in
fact there is conduct by the applicant of, we would
say, deliberate seeking to take advantages of the
time; that as a matter of discretion, the Court

would not allow this application. Now, I want to,
if Your Honour pleases, address Your Honour with
information on those matters.

HIS HONOUR:	You go ahead.
MR GRAY:	If the Court pleases, the history of this matter

started with an application to Judge Bowen-Pain,
a Master of the Supreme Court in South Australia
and he made, as is the appropriate and usual
procedure, an ex parte order for examination giving
the examinees the right to apply to have the order
set aside. That is a standard procedure.
That matter then led to argument and on

15 October the judge indicated that he would not
set aside the order in part but intended to set

aside the order in another part. That let to an
application to vary and then, on a date in
November, on 1 November, His Honour varied it
because there had been a misdescription of a

document, in effect. So that his order came to be
completed on 1 November, partly effective from
15 October, then partly from 1 November. He
extended time to appeal to the Full Court to
5 November.
Now, it happened, according to the South

Australian procedures, that had that appeal been
lodged and set down on 5 November, it would have
found its way into the December Full Court list.
The papers were lodged on 5 November, the last day,
and the appellants refused to set the matter down.

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Thus, the matter would not have made the December

list. My client then made an urgent application to
the Chief Justice in chambers for the abridging of the time because of the urgency and the delay that
was being caused and the Chief Justice then abridged the time and the case was heard in
December.
So, we say the history of the matter from

then, perhaps equivocal at that stage, showed the
examinees, in effect, using time to the limit.
Then on 23 December the Full Court delivered its
reasons and judgment rejecting the examinees'
application entirely. Apparently, on that day,
that very morning, the examinees obtained

instructions to appeal. They did not take the
usual course, Your Honour, of applying then and there to the Full Court for a stay which is the usual course that is followed, and there are
special rules under the South Australian Rules that
allow for that to happen and to be dealt with.
Rather, on the next day, my client - there

having been no application for special leave
lodged; we not knowing at that stage - applied to
the master for the fixing of new times for the
examinations and pressing for urgency. Counsel
appeared for the examinees and opposed the setting
of dates saying that there would be an appeal
lodged, giving the undertakings to prosecute the appeal and, in effect, seeking a quasi stay from

the master for having not fixed dates. The master
rejected that application and fixed dates.
Then, if Your Honour pleases, we know from the

affidavit that is in the application book that on
23 December the article clerk rang Mr Jones, the
Registrar of this Court, ascertained that the

21-day time limit ran through the vacation. Then,
apparently, the matter then went to counsel for
opinion and the matters worked through to the last
day, the applicants believing the last day was

going to be 14 January. In fact, it was the 13th.
So they were going about a course of conduct, we
say, knowing that my client was pressing to get
ahead with this matter, knowing that any delay then
can be critical in regard to obtaining special
leave appointments which are difficult from South
Australia at the best of times, and - - -

HIS HONOUR:	I am sorry, I did not follow that.
MR GRAY:	The obtaining of special leave times is very

difficult out of South Australia because one has to
either wait for a video list or, alternatively, try
to tack on to an interstate list when there is a
gap available. So, if one is looking to progress a

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matter urgently before this Court, one is getting
one's special leave out straight away and on the
phone to the Registrar and explaining the matter
and trying to find out when the next spot would be.
Now, in fact, there was going to be and is a

video date in Adelaide for 11 March. Now, we say
that had these proceedings been issued on the 24th
or thereabouts or had matters been put in train,
that date could have been used. Rather, it
suited - and I will explain why delay suits the
applicants in a moment.
So, Your Honour, the end result is that they miscalculated, obviously, but they were calculating

to go on the last day. They then applied to
Justice Debelle for a stay and at that time the
arguments were taken and His Honour's attention was
drawn to the problems with the application being

out of time. His Honour Justice Debelle made an
order that was then the subject of an appeal by my
client and a successful appeal that was resolved
yesterday morning.
Now, in the meantime, if Your Honour can leave

that scene, can I go to another scene?

HIS HONOUR:

Why is delay so - I mean, a matter of a week or

two, what does it matter?

MR GRAY:

Your Honour, I will now come to the other aspect

of the matter. In the meantime, there are some
substantive proceedings for very substantial sums
of money occurring in the supreme court between, on
the one hand, The Duke Group (In Liquidation) suing
in regard to a defective expert's report against
Nelson Wheeler Partners and that action received an
order for early trial in February of last year by
consent of the parties. But its progress towards a
trial date has been impeded by a number of matters
and it is just simply not possible to explain this.

We would want to put before Your Honour a list
which would show a repetitive list of, we would
say, defaults by Nelson Wheeler ..... time limits,
always eking out time.
In those proceedings, if Your Honour pleases,

my client, when it obtained the early trial, put
forward a case of prejudice and the prejudice was this, that the expected damages were - if I might
just pick a figure of the order of $200 million -
and was expected to be far beyond the resources of
the Nelson Wheeler Partners and absence of
information beyond their expected insurance level.
So, ultimately, if there was delay and there was limited recovery, my client would, forever, be losing ground because it would not have the use of

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the money it was entitled to. That use would be

elsewhere and would not be available. So that as
time goes on there is an ever increasing gap of
recovery between my client's ultimate recovery, on
its case, and what it might recover as a shortfall.
And that could be running into millions of dollars
a month.

HIS HONOUR:

When are the proceedings against Nelson Wheeler

likely to take place?

MR GRAY:

At the moment, if the Court pleases, it is likely,

if a certificate of readiness can be given on
1 March by Justice Mulligan, the judge assigned to
the matter, that they will start in May of this
year. But in the Full Court reasons in the
application book, if I can just take Your Honour to
that, in the judgment of Justice Olsson, at
page 41, line 3:
On the other hand I find it impossible to

envisage how it can be said that any of the
litigation between the parties is ready for
trial, even the main action - when the
proposed examinations are still pending,
joinder and pleading aspects are incomplete
(however formal they may appear to be) the
legal relationship -

et cetera. Now, other matters are being all

cleaned up. The only outstanding matter between
this and trial is the matter of these examinations.
Now, my client, if Your Honour pleases, is in

a very difficult position. It wants these
examinations to go ahead for the reasons the
Liquidator deposes to in his affidavit and one of
them is that he wants to have access to this
information to know how he should conduct this
litigation because it is potentially very long and
expensive litigation, and he cannot get that
information.

I have been instructed to say to the Court, on

the other hand, the prejudice by further delay
outweighs that prejudice. So, if we are forced
into the position of having to elect, we will elect

to proceed in May without this information. But
that is an election we do not want to make. If
Your Honour pleases, that is why delay is so
significant and if my learned friends had missed
the March video date, in the ordinary course of
events, the next time available would have been a
possible June video date from Adelaide, if that was
put in place - - -

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HIS HONOUR:

There are proceedings - there is a sitting of

the Court in Hobart which apparently - - -

MR GRAY:

Yes.

That information became available about a

week before the Full Court hearing last week. It
was something that, in fact, we initiated by
speaking to the Registrar of what might be

possible, and made available to my friends. So the
fact is now, from about 10 days ago, perhaps, we
have known of the Hobart possibility but at the
might have been August.
time these events took place in January, had the prospects
If the Court pleases, Your Honour might recall

the matter of J.N. Taylor, a special leave
application. That is exactly what happened there,
that where, in the middle of a long, civil
commercial trial the first video date was missed
because of problems with procedural matters and the
case then waited five months - - -

HIS HONOUR: Special leave was granted in that, was it?

MR GRAY:	No, refused.	I think Your Honour presided.
HIS HONOUR:	Yes.	I could not recall what the result was.
MR GRAY:	Yes.	No, the result was not attended with

sufficient doubt and a matter of practice and
procedure and refused. But that matter then waited
five months to get into the August list. That case
was delayed something like nine months whilst the
applicant for special leave pursued the matter in a
procedure - in a major commercial case - and we
could see exactly the same thing happening here.
So, Your Honour would have to judge the

question of intention and delay with the thought
that if the video date in March is missed, what

then happens? Now, Your Honour, if we are right in
those submissions, that is a very relevant matter

to what is going on at the moment and why this
Court would not indulge my learned friend's client.

HIS HONOUR: Yes. What do you say about that, Mr Mansfield?

MR MANSFIELD: If Your Honour pleases, there are four points

we say in response to that. The first is that my
learned friend, as counsel before the proposed
trial judge, indicated - and it is in paragraph 22
of the affidavit before Your Honour on this
application - that whether the Full Court did or
did not preserve the stay and whether the High
Court did or did not give special leave to appeal
in this application generally, his client would not
seek to delay the trial of the action to go through

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this process. So, on his own assertion and, in a
sense, he has acknowledged that in a more qualified
way today, the action is not going to be delayed.
The second thing, if Your Honour pleases, is -

and firmly by way of resistance to the assertion
that there is a policy of delay, as it were - the
Court has, in the application for special leave
filed, itself an affidavit of a Ms Enderbrock-Brown
who did the accounting and who explains the process
of what happened between 23 December and 14 January
including demonstrating it was simply a
miscalculation, referring to the procuring of
advice from counsel as to whether an appeal should
be instituted. That received on 5 January in the
process of preparing papers. So, secondly, we
firmly resist on that material the suggestion of
improper conduct.
The third thing we would put to Your Honour

is that if this application might cause some delay
in the proceedings, in the principal proceedings,
and we submit that it will not, but if it is,
Your Honour should know - and one can see from the
schedule, exhibit 4 to the affidavit before
Your Honour, that this principal proceeding was
instituted on 19 August 1992 after examinations of
Mr Pilmer, at least, who is to be re-examined, and
it was not until September 1993 - that is more than
12 months later - that the Liquidator issued this
application for further examination. So that his
timing, really, has produced the sequence of events
which have happened most recently.
If Your Honour pleases, they are the points we

would put by way of reply.

HIS HONOUR:

Yes.

This application as now formulated by

Mr Mansfield is an application to substitute as
parties in the application for special leave the

parties in the judgment in which it is sought to appeal was given.

Whilst I have criven careful attention to the matters which were r2ferred to by Mr Gray, it does
not seem to me that they should preclude those
represented by Mr Mansfield from correcting what
does appear to me to be an error or, in the terms
of Order 16 rule 3, "a bona fide mistake". It
seems to me that this proceeding, that is the
proceeding which is the application for special
leave, was commenced in the name of wrong persons
and that there having been a bona fide mistake it
is necessary for the determination of the real
matter in dispute to substitute different parties

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and I accede to the application for leave to amend
the parties, giving leave to amend those parties to
the application to accord with the parties in the
proceedings of which the judgment was given from
which special leave to appeal is sought.

Very well. Now, perhaps we can get to the

substance of the matter. It is your application,
Mr Mansfield.

MR MANSFIELD:

It is, Your Honour. Your Honour, we have

made available a summary of submission of
one-and-a-half pages and a book of authorities to
which I will make but brief reference.
If Your Honour pleases, I should first say to

Your Honour our clients are grateful for the Court making us time available at such short notice. It
was, in a sense, thrust on us, as Your Honour can
see by the chronology which is exhibit 4 to the
affidavit sworn in support of this summons because,
if I may deal simply with the course of the
examination orders, the examination order was
first made on 22 September of last year; there was
an application to set that examination order aside
and then an appeal from that application, which was
heard on 29 and 30 November last year, and the
judgment of the Full Court delivered on 23 December
last year. It is from that judgment that special
leave to appeal is sought to this Court.
In the meantime, if the Court pleases, on

14 January, Justice Debelle made a stay order in
respect of the examinations which were then to take
place on 21 February, a date before which, on
anyone's anticipation, the application for special
leave to appeal would be heard.
The Liquidator appealed from the stay order of

Justice Debelle on 18 January and that appeal came
before the Full Court, comprising the Chief Justice
and Justices Millhouse and Olsson, on Wednesday and

Thursday of this week, and yesterday morning, on
the 17th, the Full Court, by a majority, with the
Chief Justice dissenting, allowed the appeal and

revoked the stay order. As things then stood, the
examination was to take place on 21 February. That
is next Monday.
An application to the Full Court for a short

stay of seven days, so that an application for a
stay to this Court could be made in a little more
timely fashion was not allowed and so, to preserve
the subject-matter of the proposed appeal, if leave
be granted, it was necessary to make this
application at very short notice.

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On the application before Your Honour now, if

the Court pleases, we rely upon the affidavit which
has been filed which supports, in general terms,
the main events which one can extract from the

chronology. We accept, if the Court pleases - and
I am turning now to the submissions - that the
Court will only grant a stay in exceptional
circumstances.

HIS HONOUR: Well, there are a number of matters to be taken

into account. There is whether you pursued your
remedy so far as a stay is concerned in the court
below. Well, what happened is obvious.

MR MANSFIELD:	Yes, we have done that.
HIS HONOUR:	There is the question of any loss which occurs

by way of delay. Perhaps you can leave Mr Gray to
deal with that and you can deal with it in reply.
There is the question of the balance of
convenience. Well, you would say, I suppose, that
you lose everything if you do not get a stay.

MR MANSFIELD:	If Your Honour pleases, that is the point.
HIS HONOUR:	I think I have covered those matters, but the

crucial matter, of course, is your prospect of
success in the application for special leave to
appeal because that really would seem to be,

as at the moment advised, what this turns on. So,
perhaps you could address yourself to that.

MR MANSFIELD:

If Your Honour pleases. We accept that this

turns on that issue. There was considerable
submission before the Full Court as to what "a
substantial prospect of success" meant but I do not
think it would be useful to debate that with
Your Honour.

HIS HONOUR: Perhaps it may help you if I make this

observation. I see in a recent case of Rahme

Justice Deane may have been suggesting that the
prospect of success or reasonable prospect of
success or substantial prospect of success - and
"substantial" is the word rather than
"reasonable" - is success in the appeal itself if

leave is granted. But it would seem to me to
amount to much the same thing because since that is
an important element, that is, the prospect of
success in granting special leave, then whether or
not you view it as relating to the application or
to the ultimate appeal does not seem to matter very
much to me.

MR MANSFIELD:

We accept that, if Your Honour pleases.

Our

submission about a substantial prospect of success
is whether one uses that phrase or the other phrase

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which appears a few lines further down in
Justice Brennan's judgment of not insubstantial or
as other terms. It is really a shade of the same
thing and it really just means it is something
significant as distinct from something which is
insignificant.

HIS HONOUR:

Something more than "reasonable'', I think.

MR MANSFIELD: Yes. Well, if Your Honour pleases, if I can

take you then to the issue. At the top of page 2
of the submission we say that which, in our
respectful submission, is the issue upon which
special leave to appeal principally is sought, that
is, can a liquidator examine a potential defendant
in relation to an actual or possible action by the
company in liquidation to determine the extent of

the assets of that potential defendant. And the
consequence, perhaps rather than part of the
proposition is, that if that right exists, it would
enable a liquidator in, for example, the present
proceedings - and there are proceedings against the
Western Australian partners as well as all the
Australian partners - to examine each of them upon
their assets and, in the case of Kelly v Murphy -
to which I will draw Your Honour's attention
shortly - involving the joinder in that action of
the Freehill Holdingdale and Page partners around
Australia to do the same thing.

HIS HONOUR:

We will wait until you come to Kelly's case but

whom you seek to sue, if you are a
there are some aspects of that I find puzzling. of those
liquidator.

MR MANSFIELD:

Your Honour, the starting point, in our

respectful submission, is that the power for
examination is that in the Corporations Law and,
Your Honour, I think, has a loose copy of the
relevant sections so far as we discern them to be

the relevant sections.

HIS HONOUR:

The orders were made under 596B and 596D, I

take it, were they?

MR MANSFIELD:

Yes, Your Honour.

The relevant phrase is

really at the start of 596B:
The Court may summon a person for examination about a corporation's examinable affairs -

and then the relevant people here are under
(b)(ii), if:
the person:

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(ii) may be able to give information about
examinable affairs of the corporation.

Now, in our respectful submission, the issue upon
which special leave is to be sought and which is
the substantial issue is whether the examinable
affairs go beyond measuring the prospects of
success in a perceived chose in action to the
prospects of recovering against the proposed
defendants if that perceived chose in action is
made out, or whether they are limited to the
prospects of success in the action itself.

HIS HONOUR: Well, really, you take it straight to the

definition of "examinable affairs".

MR MANSFIELD: If Your Honour pleases, that is so, and that

definition is in section 9 and it incorporates, by reference to subsection (b), section 53 of the Law. Section 53 of the Law is, in terms, similar to that
which was provided in the 1981 Act.
If Your Honour pleases, the analysis of that section, in our respectful submission, looks at the
issue of "examinable affairs" from the point of
view of the corporation in liquidation and what it
has done or not done or how it has dealt with or
been dealt with by others. But there is a very
clear line at which one can say, in our respectful
submission, that that is where an examinable affair
stops.
The cases, which we would not seek to go

behind, would clearly support the proposition that
an examinable affair of a corporation can include a
prospect of an action by the corporation against

another person. But the cases, in our respectful
submission, do not - - -

HIS HONOUR:	Where does that fall within the definition of the affairs of the body corporate?
MR MANSFIELD: If Your Honour pleases, it comes from (b) in

the definition of "examinable affairs", and then if
one turns to section 53, probably the closest that
it comes to is in section 53(a), after the
reference to "promotion", et cetera:
property (whether held alone or jointly with
any other person or persons and including
property held as agent, bailee or trustee) -

and so on. It seems that the courts have treated
the concept of property as including the chose in
action.

HIS HONOUR: Well, it is defined, is it not?

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MR MANSFIELD: Section 9 defines "property" to mean:

legal or equitable estate or interest (whether
present or future and whether vested or
contingent) in real or personal property -

Now, our respectful submission is that following
that trail through, there is a very clear line
which stops with saying, "The property may be the

chose in action. You can examine people to see
whether you do have that cause of action and how
much judgment you might procure in terms of the
amount of the claim", but it stops short of saying,
"You could then, in anticipation of that judgment,
examine the proposed defendants to see how much
money they have behind them; whether it be
insurance protection or personal assets or
whatever". In our respectful submission, it is
simply a case of looking at the definition of
"examinable affairs" to see whether it, on its
face, extends what is on all accounts an abnormal power - not an extraordinary power in a technical
sense, but an abnormal power in a liquidator to go
that far.

HIS HONOUR:

Why should not a liquidator under those

particular provisions have the power to examine
persons to ascertain whether it is in the interests
of the company or those who are going to receive
anything out of the liquidation to pursue properly
or not to pursue it by action?

MR MANSFIELD: In our submission, Your Honour, the answer

is that the Liquidator is given this power because
the Liquidator, coming into the company cold, as it
were, is not in as good a position as the company
through its directors to know what has transpired
between the company and others and he necessarily needs a power to enable himself to put himself as

fully as he can into the mind of the company. If,
as the cases say, that gives him an advantage in
litigation then, so be it, but the section is

necessary to put him, as it were, in the mind of

the company.

HIS HONOUR:

Is that the sole purpose of the powers of

examination? Is there not a public purpose for it
all?

MR MANSFIELD:

Yes.

The public purpose, in our respectful

submission, Your Honour, is to enable the
Liquidator to get what it is that the company is entitled to and to give him the means of knowing,
as well as he can, what it is that the company

might be entitled to. To that extent, he gets the
advantage sometimes of being better off in

litigation than would otherwise be the case. But

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it is not a purpose, in our submission, which
entitles him, unlike any other litigant, to say,
"Not only do I see what the company is entitled to,
which I could not otherwise work out without an
examination, but I am also entitled, unlike any
other litigant, to examine a potential defendant to
see whether the potential defendant has assets"
because it takes him another step removed from the
position of the litigant generally.
In our respectful submission, if Your Honour

looks at the definition of "examinable affairs" and
definitions of "property", one is looking to put
the Liquidator in the position, as best that power
can be, of what it was that the company would have
been in had there been no liquidation and had the
directors been assiduously pressing the claims of
the company.
That is the line that we seek to draw.

Obviously, the Full Court has not drawn that line.
As Your Honour may be aware, Justice Drummond, in
the Federal Court, has also been asked recently to
decide the issue and has not drawn the line which
we submit should be drawn. In the Federal Court,
about two weeks ago, in Victoria, Justice Jenkinson
was asked to draw the line again in that same
position and His Honour has reserved judgment on
that. So, it is a matter which liquidators
generally, in the last few months in effect, are
seeking to go beyond that which has, at least so
far as the reported cases disclosed, they have done
up until now.

HIS HONOUR:

What are the reported cases on which you rely?

MR MANSFIELD:

If Your Honour pleases, the reported case to

support the proposition that this is a new
extension of the exercise of the power is simply
the absence of cases which previously have

considered whether this line should be drawn or not

because the issue has not been reported upon.

HIS HONOUR: Well, Kelly v Murphy in a sense raised it, did

it not?

MR MANSFIELD: There is Kelly v Murphy; there is the

Full Court decision from which the application for
leave to appeal is being sought; there is a
decision of Justice Drummond in a matter of
Interchase which was a Federal Court decision of
8 December 1993. It is entitled In the matter of
Interchase Corporation (In Liquidation). It is now reported - I am grateful to my friend. It is in
their book of authorities, case 10; and there is
Kelly v Murphy in the Court of Appeal of New South
Wales.

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HIS HONOUR: So, there are, in fact, two: Interchase and

Kelly v Murphy on which you rely?

MR MANSFIELD:	Yes, Your Honour.
HIS HONOUR:	Perhaps you could take me to those shortly, the

parts of those you rely on.

MR MANSFIELD:

Yes, if Your Honour pleases.

I accept that

Justice Drummond in Interchase adopted the same
approach as the Full Court in South Australia, that
is, simply to say the Liquidator can legitimately
not only look at what cause of action he has but
whether it is worth pursuing by looking at the
assets of the defendant.

HIS HONOUR:

Can you point to the particular passage in his

reasons which gives the rationale for that
approach?

MR MANSFIELD:

Yes, if Your Honour pleases.

I had a loose

copy of the judgment, if Your Honour pleases. I
will give Your Honour the reference. It is towards
the very end of the judgment. It is the third to
last paragraph in the judgment, if the Court
pleases.

HIS HONOUR:	"The question whether"?
MR MANSFIELD:	"The question whether", that is the essence

of His Honour's reasons.

HIS HONOUR:

Yes.

He does not relate that back to any

particular part of the definitions?

MR MANSFIELD:

No, Your Honour. His approach probably is a

little less specific than the approach in the
Full Court of the Supreme Court of South Australia.
But he does refer to two cases: Laurie Cottier and
Indopal, and Your Honour can see the passages
referred to in the immediately preceding two

paragraphs of His Honour's judgment.

HIS HONOUR:

I suppose one can approach it on a sort of

global basis by saying, "Well, look, the Liquidator has to conduct the winding up in the most efficient
and economical way possible. There is no doubt
that the information which you are seeking here and
seeking in these other cases would be of great
value in charting the proper course, and since the
proper conduct of the litigation involve the
affairs of the company then he should be in
possession of all information - should be able to
obtain all information which enables him to do the
best he can". That is the sort of approach that is
adopted, I take it, by Justice Drummond?

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MR MANSFIELD:	Yes.
HIS HONOUR:	What is wrong with that?
MR MANSFIELD:	What is wrong with that, in our respectful

submission, is that the power which is a statutory
power has limits which the phrase "examinable
affairs" imposes upon the exercise of that power
and the emphasis is upon finding out what it is
that has happened in relation to the corporation of
which he is the Liquidator and not beyond that,
because if it were intended to go beyond that it
would then be putting the Liquidator in a better
position than any other litigant.

HIS HONOUR:	But it is conceded that that may happen.
MR MANSFIELD:	The cases say that is an incidental

consequence sometimes of finding out what you can
about the corporation's affairs so that as has
happened here and often happens, you examine a
person about their dealings with the corporation
and probably find out more than the corporation
might otherwise have known. For instance, you get
files of accountants and whatever, but there is
still a line, in our submission, to be drawn. If
the legislature had intended the Liquidator to be
in that additional beneficial position, it would
have used a different limit or expansion of the
powers of the Liquidator or the powers of the
examiner under sections 596 and 597 than the phrase
"examinable affairs."
If Your Honour pleases, the only authority

other - - -

HIS HONOUR:	What about Kelly v Murphy?
MR MANSFIELD:	Yes, I am just about to turn to that, if

Your Honour pleases. I must confess it is the only
other case dealing with the issue of which we are

case which is helpful to the application for leave. aware and in this case. In our submission, it is a If Your Honour has had an opportunity of having a
look at Kelly v Murphy - - -

HIS HONOUR:	I have but it was fairly brief.
MR MANSFIELD:	Yes. Well, the background to Kelly v Murphy

was that the Burns Philp Trustee Company, in
relation to the Estate Mortgage Trusts, had been
replaced and an action was commenced by the
liquidator against the Burns Philp Trustee Company
and others including the directors of that company,
one of whom was Short who was a partner in
Freehills.

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To expand the action - and it seems that
promoting the new trustee, all of the partners of

irrelevantly because of some other interest acting as a director of the trustee company, was acting also as a partner of Freehills, so that all the partners of Freehills ought to be liable for
what he was liable for as a director.
There was then an application for an order

examining certain persons and for the presentation
of documents from Freehills relating to their
internal arrangement between the partners to see
whether the case could be made out that Freehills
was or was not liable under that process, and one
can see that that was the purpose of the trustee in
the report in the judgment of His Honour
Mr Justice Sheller at page 1235, column A.
Justice Bryson, at first instance, dealt with

that application and after some review of it made
an order for the production of a series of
documents including the insurance policies and
insurance arrangements of Freehills because, as
His Honour said, "Those documents may be relevant
to that relationship." But His Honour also
excluded from the insurance documents which were
required to be produced, things specifying the name
of the insurer, the level of the insurance and the
structure of the indemnity because it went to a
different issue.

HIS HONOUR: That is the aspect of the case I find a little

difficult. What was the relevance of the insurance
if you cut out those things?

MR MANSFIELD:

As I read the judgment, if Your Honour

pleases, the relevance was to show how the partners
had, amongst themselves, carried forward their
insurance and what sort of insurance they carried
forward with an insurer, but it would not show the
liquidator how much there was an insurance for or

who the insurance was with.

HIS HONOUR:	That is what he wanted to know, was it not?
MR MANSFIELD:	The purpose of the examination ostensibly was

to say, "We want to see what your internal
arrangements are and your insurance arrangements
will be partly relevant to that and therefore you
must - - -"

HIS HONOUR:

"but not to show what resources there are to

recover if any judgment is entered against any of
the parties."

MR MANSFIELD: Yes, exactly so, Your Honour.

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HIS HONOUR:

You say that is the effect of that case?

MR MANSFIELD:

That is the effect of that case.

But

His Honour Justice Bryson having made that decision and saying, "Well, you can see these things apart from the amount and the insurer", Freehills
appealed, and as Your Honour can see,
unsuccessfully, but the respondent cross appealed,
and on the cross appeal sought, as Your Honour can
see at page 1237, to extend the basis of the
examination by saying that those parts of the insurance policy should be provided and about
7 lines from the bottom of column A that argument
is recited:
The respondents argued that this information,
which might enable the respondents to consider
whether or not proceedings against Mr Short or
the partners of FHP should be pursued or
abandoned, should not be deleted.

And then His Honour for the Court of Appeal then
refers to the judgment of Justice Bryson which,
again about 7 or 8 lines down from the second
column, continues - - -

HIS HONOUR:

Yes.

Then His Honour says in the last

paragraph but one he does not think that
His Honour's conclusion in imposing those limits
involved any error in discretion.
In any event I am not satisfied that provision
of the information the respondents seek would
not be oppressive.

He goes on to say, "Well, they could require all
the partners of Freehills":
to produce whatever professional indemnity
insurance they may have -

and so on. I am, at the moment, a little puzzled
why he speaks in terms of oppression. It is not a
very difficult thing to do. I can understand when
one speaks in terms, as you do perhaps, of
relevance in the sense that this is not the affairs
of the company at all, this is going beyond the
affairs of the company merely to investigate the
capacity of outsiders to meet a judgment, but that
is not the way he puts it.

MR MANSFIELD: In our respectful submission, there are two

reasons given. One is the point that we seek to
ventilate on the application for special leave
because, in our respectful submission, one can see
from the terms of the cross appeal that the
complainant or the cross-appellant, the respondent,

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was in effect saying, "Having got that information,
it would also be useful to me to know whether
Freehills have got enough money anyway to make it worthwhile'', which is the sort of rationale which the Liquidator here has, and Justice Bryson
declined that.
His Honour Mr Justice Sheller for the Court of Appeal, in our submission, says, firstly, there is
no error of principle about that and, secondly, it
might be oppressive or it would be oppressive to
require that. Now, the issue of oppression is a separate issue which the court granting leave to
examine has to consider in any event, and there is
no issue of oppression as such in this case and
could not be raised on the application for special
leave. There is just not the material there for
it.
So, we do not seek to use that second reason

but we do submit that the Court of Appeal in Kelly
v Murphy have said that taking the extra step
beyond what we submit is the quite clear line,
which Justice Bryson declined to do, was not an

error in principle. So that although, without the
detailed analysis of the sections which one might
in another case see, the conclusion is reached
which, in our submission, is consistent with the
argument we would seek to advance.

HIS HONOUR:

There is no doubt it may be to the advantage of

the Liquidator to obtain the information, but you
say, well, it certainly may be, but it may also be
to the disadvantage of your clients and they, after
all, are not the company.

MR MANSFIELD:	No.
HIS HONOUR:	And are entitled to resist the provision of

this information. That is really what it comes
down to.

MR MANSFIELD: That is all it comes down to, Your Honour,

yes. We say there is a line to be drawn by
reference to the terms of the statute.

HIS HONOUR:

You say the authorities, such as they are, are

not really satisfactory and that there is a real
question to be determined - - -

MR MANSFIELD: Indeed, and it is a matter, as it now

appears, of gathering momentum on a matter of
general importance for liquidators.

HIS HONOUR:	Is it likely that this Court would grant special leave in what are essentially interlocutory
proceedings?

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MR MANSFIELD: In our respectful submission, it is "likely",

using Your Honour's word, that the High Court would grant special leave in this particular circumstance
because it really involves a question of the
interpretation of a statute where ostensibly, from
cases now coming up, liquidators are seeking to use
the power of section 596B in a way which, at least
from reported cases before late last year, it was
not being sought to be used and progressively those
cases will be decided and the Court will be asked
to say, well, they can or they cannot and, in our
submission, it would be appropriate that the High
Court should consider that general question and tell the courts of Australia what they should do when those issues arise as they are obviously

likely to continue to do. If the Court pleases,
that is our submissions.

HIS HONOUR:

Thank you, Mr Mansfield.

Mr Gray.

MR GRAY:

May it please the Court. Could I just identify

the evidence dealing with the Liquidator's
intention and purpose because when Your Honour
con.siders this case, for example, compared to
Kelly's case, the evidence of purpose was quite
different. Your Honour, in the application book,
has that set out in Mr Sheahan's affidavit in the passage commencing at page 6. There are a series
of paragraphs where he sets out the probability of
there being insurance and then at paragraph 18:
I wish to examine -

the three partners -
in relation to their present professional
indemnity insurance arrangements to ascertain
whether the present Nelson Wheeler proceedings
should be pursued and if so in what form.
Those proceedings claim damages in excess of

$100 million. I am informed by my solicitors

and believe it to be true that they have
requested the defendants' solicitors in the
Nelson Wheeler proceedings to provide them
with evidence demonstrating that their clients
are able to satisfy any judgment that may be

award in Kia Ora's favour. I am also informed
by my solicitors and believe it to be true
that no such evidence or assurance has been
given by the defendants' solicitors.
The level of the insurance cover of the
defendants ..... is a matter of vital importance

to the administration of Kia Ora. The chose
in action represented by the Nelson Wheeler
proceedings is the largest and most

significant asset of Kia Ora. The trial of

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the Nelson Wheeler proceedings is likely to be
a long and expensive one with present
estimates being that the trial will take

between 3 to 6 months to complete. The level
of the defendants' insurance cover and the
issue of whether the defendants' insurer has
extended indemnity to the defendants -

may approach the manner in which litigation is
dealt with.

HIS HONOUR:

I do not think it is contested that it is

information which would be very useful to the
liquidator in knowing how to conduct himself in
relation to proceedings.

MR GRAY:

If Your Honour pleases, I have gone to that in

detail because the purpose - I will take

Your Honour to it - in the Kelly case was quite

different. The purpose there was confined in the
affidavit of the Liquidator's assistant to going to
the relationship to support the claim for vicarious
liability.

HIS HONOUR:

Can you take me to the passage where that

appears?

MR GRAY:

Yes, I can.

Your Honour, it is behind tab 11 in

our book and if Your Honour goes to page 1235,
left-hand column, under the heading, "Evidence of
purpose".
Part of the evidence led by the

respondents at the hearing before Bryson J was
an affidavit of Catherine Mary Nixon in which
she said -

and 18 is the critical one:
The Trustees propose to examine Mr Short in
relation to the relationship between himself,
BPTC and Freehills and the extent to which

Mr Short's activities as a Director of BPTC
Limited were carried out as part of the
business of solicitors conducted by Freehills.
Documents in the possession or control of
Freehills, called for by the Order for
Production of Documents, will be used in the
examination of Mr Short.

So, with that purpose in mind, Justice Bryson has
said, "Yes, it is relevant for you to see the
relevant material from the insurance policy but you
have not made out as your purpose the question of
the assets.

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HIS HONOUR:

And, indeed, the last two lines in the

left-hand column and the first two lines on the
right-hand column demonstrate that.

The insurance documents included in para 12,
about which the appellant made particular
complaint, throw light on the scope of the
partnership business.

And paragraph 12 appears on the preceding page.
That is requiring:
Any policy of professional indemnity
insurance - - -

MR GRAY:

Yes.

The question of quantum and availability not

relevant.
Now, when Justice Sheller deals with the matter at page 1237, in the right-hand paragraph,
at about line 7, he says:
it is also likely that the documents will
reveal if examined fully information about the
quantum of insurance and structure of
indemnity which could have no part in any
useful examination of Mr Short on relevant
matters.

So, that is relevant in regard to the particular
Liquidator's applications in that case.

So, what we say is that Kelly v Murphy, in

fact, does stand for the proposition that
"examinable affairs" can include going to insurance
policies and what, in the discretion the court
might allow, will depend on the Liquidator's sworn
purpose. So, the case of Kelly v Murphy and the

case of Gerah v Duke are not in conflict all. On
the critical question, we say there is no conflict.

We put our case in three ways relevant to

"examinable affairs" and the first, if Your Honour
pleases, does involve a consideration of the
Bankruptcy Act. Could I take up the point from the
reasons of Justice Olsson speaking for the
Full Court?

HIS HONOUR:	Yes.
MR GRAY:	If Your Honour turns to page 35 of the application

book, His Honour, at line 15, starts with

section 9, "examinable affairs". He then goes
through to section 53, which Your Honour has been

taken to. He then, at line 10 on page 36, goes to
the definition of "property" and, Your Honour, I
wish to emphasize that we are here concerned with a

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contingent future asset so the chose in action is
an existing asset. But, Your Honour, on
bankruptcy, the proceeds of any insurance policy
are held on trust for the party in favour of whom
the award for damages may have been made.
Now, His Honour Justice Olsson, at the foot of

page 37 and the top of page 38 makes reference to
the J.N. Taylor case and, in that regard, could I
invite Your Honour's attention to the authorities.
It is behind tab 9 in our book of authorities.
Could I just set the context of that case to remind
Your Honour?

HIS HONOUR:	Yes.
MR GRAY:	It was a question as to whether the plaintiff

could bring in the insurer by way of declaration
and it was a question of whether a sufficient nexus

had been shown to allow that to happen. The
plaintiff, J.N. Taylor, in liquidation, argued that
because the proceeds of insurance, once liability
is established, could be held by the trustee in
bankruptcy in trust, that gave rise to an equity.
The Chief Justice, at page 437, summarizes the
point. At point 5 on the page, Your Honour, he
sets out section 117 of the Bankruptcy Act and I
will not stay to read that but the Chief Justice
summarizes it in the following paragraph:
By virtue of that section, if the trustee in
bankruptcy were to obtain payment of moneys
from the insurer in consequence of a judgment against the defendant directors, those moneys
would not be divisible among the creditors but
would be payable to the plaintiffs.

So, in this case, if Your Honour pleases, there is no reasonable expectation that the Nelson
Wheeler partners personally would be able to meet
the judgment debt. That will lead to bankruptcy in
the event of there being non-payment. That would

then lead to the trustee in bankruptcy holding the
proceeds of any insurance policy in trust for my
client. If Your Honour pleases, in fact, the only
real interest in that insurance policy in a case
like this rests in the plaintiff and not in the

defendants. The benefit of that policy does not
flow to the defendants, it flows to the plaintiff,
once they become bankrupt.
So, Your Honour, the first reason we say that

this is an examinable affair is that we are
talking about a right in equity, a contingent right

in equity against the insurer as the asset, as the
property of the company, and that was one of the
lines of reasoning of the Full Court. We do not

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stop there. We say that that point is not really
open for debate on the legislation. The definition
of "property" is so wide that it, when coupled with
section 117, closes off the point.
Now, Your Honour, as we understand it, one of

the primary grounds of appeal, if Your Honour goes
to the notice of appeal, and the only case
mentioned in the notice of appeal, if Your Honour
goes to the end of this booklet, page 74, having
argued that it is not an examinable affair, it is
suggested that J.N. Taylor was wrongly decided.
Now, this Court has already ruled that it would not
grant special leave to review that decision because

it was not attended with sufficient doubt. So
there can be, we say, simply no reasonable prospect of special leave being granted to review that case.
The second way in which we say this is an

examinable affair, if Your Honour pleases, is that
having identified the claim against the Nelson Wheeler defendants as being a chose in action,
there are two relevant matters to any litigant
proceeding with litigation of this type - bearing
in mind the public administration, the cost to the
court and the State running a case like this - is
what are the prospects of success in law and what

are the prospects of recovery in fact. What my
learned friend's argument leads to, if Your Honour
pleases, is that the Liquidator is to, in effect,
be blindfolded to the prospects of recovery in
fact, commit the liquidation to the enormous cost
of these cases and the public administration
enormous cost.
Your Honour, that is where we say the public

purpose behind the examination power is paramount.
One of the public purposes, Your Honour, that this
Court has identified in Oades and Mitchell is to
preserve the assets of the company in liquidation. The other is, of course, the wider public interest

in regard to .... examination.
Now, Your Honour, in Oades' case this Court approved the case of John Arnold's Surf shops and,
in particular, Your Honour, the statement that this
section does give to the Liquidator rights that a

normal litigant does not have. I do not know if
Your Honour wishes to be taken to that particular passage?

HIS HONOUR:	No.
MR GRAY:	So, that is the second reason why we say this is

plainly an examinable affair.

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HIS HONOUR:

It is not so much rights that a normal litigant

does not have. In a sense, that is true. It is,
in fact, that he is not a normal litigant. He is
acting in the winding up and it is in the winding
up that he seeks this information in order that he
may perform his functions in the most efficient and
economical manner so as to preserve the assets of

the company. Those are things which simply do not

concern a normal litigant. What you are really
directing your attention to is something that, in a
sense, lies outside the litigation ..... is extrinsic
to it.

MR GRAY:

Yes. Another way to put that, Your Honour, is to

identify his role - this is a court appointed
liquidator - as an officer of the court and he is
in charge of the statutory responsibilities which
is really, perhaps, the better way to enter the
thicket.

HIS HONOUR: But, really, you say the question is does he

have to perform his functions in ignorance or in an
informed way and you say the section is there
providing him with the information so he can
perform his functions in an informed way.

MR GRAY:

Yes, we do, Your Honour. At page 38, line 17,

in the application book Justice Olsson put that
point this way:
So also those aspects are relevant to the
liquidator's administration in the winding up,
because they bear upon the assessment which he
needs to make as to what steps are, in
commercial terms, proper and desirable to take

in discharging his duties. The commercial
reality of pursuing long and expensive legal
proceedings for a very large sum of money
against individuals of finite resources is
clearly a matter as to which he needs to make
a judgment, based upon the likelihood, or

otherwise, of potential ultimate recovery from

a relevant insurer. (As to this, what fell
from Mason CJ in Hamilton v Gades).

We say that the distinction my learned friend seeks

to make cannot stand. He wants to draw a line at
an utterly artificial point which has no common
sense to it and does not accord with the intent of
the statute.
Your Honour, that particular view has found

favour with not only the court in Gerah v The Duke
Group, also Justice Drummond in the Federal Court,
Chief Judge Waddell in the Laurie Cottier case and
Justice McLelland in the Indopal case. My learned
friend, if Your Honour pleases, cannot draw one

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case to Your Honour's attention where the point has
been decided to the contrary.

HIS HONOUR: Really, if you take the Kelly case, if it is

within the powers of the Liquidator to obtain an
examination under the relevant sections to see whether which partners, if any, of the firm of
solicitors are liable for the activities of the one
partner concerned, I presume it stops short of the
logical conclusion of that inquiry which is, and if
there are other partners, whether they can satisfy
judgment. That is the way you put it.

MR GRAY: It is.

HIS HONOUR:

Why would you stop short?

I am not putting

that very well, but what I am saying is if the
liability of the other partners is a relevant
matter, they being outside the company, the
litigant, then why not the capacity to satisfy any
judgment?

MR GRAY:

Yes, indeed.

The reason why that did not, in

effect, go further in Kelly's case - - -

HIS HONOUR: Well, I appreciate the way you put that.

MR GRAY:

Yes, Your Honour has the point there.

Your Honour, there is another area of the law which
by way of analogy is perhaps helpful showing the
Court's attitude in these matters. It is in regard

to security for costs. When a defendant makes
application for security, one of the matters
relevant to be considered in the discretion is the
extent and nature of insurance available and if the
defendant does not bring forward and disclose that
then an inference will be drawn. There are a
number of cases that demonstrate that that is a
relevant factor to be disclosed and is disclosed.
In appropriate cases, if there is thought to be
some wider confidential ..... to the litigation there

can be a confidentiality order. There are other
areas, too, where insurance matters become
relevant.
Could I come to the third strand, if

Your Honour pleases, as to why this is within
"examinable affairs" and it is this, that if in
fact the position is that there has been a refusal
in whole or in part to indemnify - offer
indemnity - under the policies of insurance, there
is a very strong public interest in cases of this
magnitude involving months and months of trial
time, let alone appellate time before the courts,
with the incumbent costs of their administration as well as the parties, to have all parties before the court at one time. That was the rationale behind

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the J.N. Taylor decision, to bring the insurer in,
so there would be one trial, and not for the
administration of the court and the plaintiff to
face a complete rerun -

HIS HONOUR:

And the possibility of inconsistency.

MR GRAY:

And a possibility of inconsistent findings.

Now,

we say here that, (a) we do not know what insurance
there is and, (b) we do not know the attitude of the insurers under the relevant policies. There
has been, in an affidavit, a statement that there
has been a liability admitted under a 1987 policy,
but that is not the relevant policy. These are
claims made policies and there will be a 1992
policy, in all likelihood, that is the relevant
policy.
There might be an agreement to go into partial

indemnity, for example, in which case as soon as my
client finds out there is a problem at the
indemnity level, we must consider our position in
regard to joinder because my client, with the
duties he has, does not want to involve this
company in yet another mass of litigation. But,
Your Honour, this particular company was involved
in litigation once before that ran for 18 months
before the matter was resolved. So, we are acutely
aware of the need to try to contain these matters.

HIS HONOUR:	Those are the three - - -
MR GRAY:	They are the three reasons why we say this is

fairly to be treated as an examinable affair and
there are no real prospects of success.

HIS HONOUR:

You would not concede, I take it, that if there

were a prospect of success, the other matters which
are to be considered are in favour of the
applicant?

MR GRAY:

No, Your Honour, we would want to put arguments on

all the other factors.

HIS HONOUR:	Would you?
MR GRAY:	Your Honour, I can summarize them very briefly.

We say that not only is this a matter of mere
practice and procedure, it does not involve what,
in law, are substantive rights of the examinees and
we deal with that at point -

HIS HONOUR: It involves an immunity, does it not?

MR GRAY:

Your Honour, the matter was addressed - perhaps I

could put it this way - - -

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HIS HONOUR:

Which in Hohfeldian terms is a type of right,

is it not?

MR GRAY:

Yes.

Your Honour, it was just that at point 8 in

our written argument - I do not know if Your Honour
has had the chance of perusing that?

HIS HONOUR:	Read it to me, Mr Gray.
MR GRAY:	Your Honour, the summons under attack is not a

summons against a person summonsed in the
substantive sense that it affects his rights, see
Shapowloff, a decision of the New South Wales Court
of Appeal where President Jacobs said:
It is not a subsection which determines
rights -

this is the precursor to 596B -
or imposes obligations, unless the obligation
to attend the Court is regarded as an

infringement of a person's rights. Such an
obligation is not an infringement; it is part
of the duty from time immemorial of a person

to attend the Queen's Courts to give evidence. That is the New South Wales court dealing with a
596B summons and characterizing it as a matter of
practice and procedure and not affecting what is

normally called the substantive right. So,
Your Honour has the argument there in writing.

HIS HONOUR: There may be a jurissprudential argument about

that.

MR GRAY:

Can I say this to Your Honour, that it was my

learned friend Mr Mansfield's submission to the
Full Court the matter is one of practice and
procedure. Justice Olsson has treated it such as
has the court and it has been our submission. So,
Your Honour in fact here deals with a matter of

practice and procedure - and if I might pick up the
wording of the Chief Justice in Smith Kline's
case - "one which they have lost at every step
along the path", and if I can pick up Your Honour's
reasoning in the Santos case, "being interlocutory,
one where it is most unlikely that the High Court
would grant special leave."

HIS HONOUR: It was a joint judgment in Santos' case, was it

not?

MR GRAY:

Yes, Your Honours' joint judgment in the Santos

case.

HIS HONOUR: It was a joint judgment.

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MR GRAY:	Your Honour, it is a case - - -
HIS HONOUR:	I am only teasing you, Mr Gray.
MR GRAY:	If Your Honour pleases, it is case 3 in the book. So, when Your Honour stands back from it, we say
that because of the nature of the issue it is
inherently unlikely to attract special leave.

When Your Honour then goes to analyse the

legal point, the cases appear to be one way. My
learned friend cannot produce to Your Honour one
judgment from this country which supports where he
says the line should be drawn. If Your Honour
pleases, when Your Honour tests it in common sense
against the public purpose of the section, we say
that Your Honour would find our submission
attractive.

HIS HONOUR:

What do you say about the balance of

convenience?

MR GRAY:

Your Honour, on the balance of convenience, I have

articulated our prejudice rather poorly and it is
because - - -

HIS HONOUR:

I think it is the question of delay and the

facts of the action, so that you really cannot show
any loss in terms of hard cold cash.

MR GRAY:

Your Honour, we say we can.

I am just wondering,

if Your Honour pleases, so I do not slip up -
conception a little difficult. Your Honour, there
is an affidavit of Mr D'Arcy's that was before the
Full Court which is not amongst the papers that
Your Honour has, and if I could just pass the
relevant paragraph to Your Honour, Your Honour will
see how - the reasoning is postulated on the basis
that we recover a judgment that is only part

satisfied. Once that situation happens, as delay
occurs, our position steadily worsens and with the

sums of money involved - - -

HIS HONOUR:

I do not follow, Mr Gray.

You seek to find out

what the means are of the various defendants to
satisfy any judgment.

MR GRAY:	Yes.
HIS HONOUR:	If special leave to appeal were granted, the

result would either be in the end that you could or
could not find that out, but how would that make
any difference to your - - -

MR GRAY:

Because, Your Honour, it is being treated as a

matter holding up this litigation by the Supreme

Filmer

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Court in South Australia in that passage I
read - - -

HIS HONOUR:

But we are really talking about the stay at the

moment, are we not; just the stay? How could the
stay cause you any loss, assuming that the matter
were heard - - -

MR GRAY:

Your Honour, the reason why the Full Court refused

to grant a stay - when my friend made an
application to this Court for stay was because we
have got an examination date on Monday.

HIS HONOUR:

That is true but where is the loss if you have

to put that off for a month?

MR GRAY:

Because, if the Court pleases, we are then being

forced to make an election as to whether we proceed
for trial, if the Court will allow us, in May - - -

HIS HONOUR:

If you get an early hearing in March.

MR GRAY: If Your Honour pleases, if special leave is

refused in March, then the prospect of prejudice is
greatly minimized because we would expect a date
from our court - - -

HIS HONOUR: If it is granted?

MR GRAY:

If it is granted then, presumably, the Court hears

the matter in Adelaide in August and we then have
to face do we elect to proceed with a trial without
the possibility of bringing the insurer in,
without -

HIS HONOUR:

But I am only concerned with the stay until the

time the special leave application is heard and I
do not really see any loss that flows from that.
The other side would have to make another
application.

MR GRAY:

No, that does not cause us prejudice.

We say the

prejudice in fact lies in what happened from
Christmas and not getting in the March video list
and fortuitously my friend has been able to, with
respect, ..... through our endeavours to learn of a
date in Hobart because we are quite anxious, if leave, to have it heard promptly. If Your Honour pleases.

HIS HONOUR:	Mr Mansfield.
MR MANSFIELD:	If Your Honour pleases, in response to my

learned friend's - I should not call him too
learned, I suppose - but in response to Mr Gray's
submissions, just taking them sequentially, the

Pilmer

44

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assertion that this sort of information is relevant
to what he described as a contingent future asset,
in our respectful submission, is the very issue
upon which we submit special leave to appeal should
be granted because it is going beyond an asset in
the sense in which that term has been, in our
respectful submission, from the cases,
traditionally treated to something quite different.
Although my learned friend said Kelly v Murphy

did not advance our position at all, and it is true

on the appeal it did not advance our position
because of the purpose which was on the appeal,
when one looks at the cross appeal, that passage
that I referred to Your Honour, the argument
advanced by the Liquidator there was to say, "I
want to find this out because I want to know what
the assets are", and that is the purpose which was
extended.
The second thing, if Your Honour pleases, is

this: my learned friend referred to the
J.N. Taylor case and said, in effect, "Well, they
might want to join the insurer." In our
submission, we do not, as he asserted in the
proposed notice of appeal, say that that case was
wrongly decided. That case was, as Your Honour may
recall, decided on a very specific set of
circumstances and the issue in that case was
twofold: whether the Court had, under its power to
make declarations, a declaration that an insurer
was obliged to indemnify a defendant who has not
sought that insurance and, secondly, if that power
existed and the Court said it did exist, then
whether it was a proper exercise of discretion to
join the insurer in the action for the purpose of
that declaratory relief.
Now, that is rather different, in our

respectful submission, from the circumstance or
proposition which my friend now seems to be
advancing of saying in every circumstance where

there is a big case the insurers should be joined
as party to the proceedings and so it is just a
different circumstance.
The third thing, if Your Honour pleases, my

chose in action in the main action, it was in the public interest that he should know the prospects of success in law and the prospects of recovery in
learned friend put the argument that because the
fact. Again, in our submission, that simply
recites the issue upon which we submit special
leave to appeal should be granted. But he said the
Liquidator needed to know that.

Filmer

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The Liquidator, in that sense, is in no better or worse position and, in our submission, should be in no better or worse position than the company
through its directors because the directors of the
company while the company is solvent equally have
the duty to look after the interests of the members
and the creditors and so too does the Liquidator.
So that the fact of liquidation, in our submission,
does not advance the Liquidator's purpose or the
Liquidator's rights under the terms of the statute
which we submit should be construed in the way
contended for.
In respect of the issues of balance of

convenience, if Your Honour pleases, I think we
have put the issues before Your Honour.

HIS HONOUR:	I do not think you need to go through them.
MR MANSFIELD:	Thank you, Your Honour.

HIS HONOUR:

Very well.

I will leave the bench for a short

time to see if I can get my thoughts together. It
will be desirable if you just remain here,

gentlemen. I will endeavour to come to some
result as soon as I can.

AT 4.15 PM SHORT ADJOURNMENT

UPON RESUMING AT 5.05 PM:

(Reasons for judgment were delivered)

HIS HONOUR:

The application is accordingly refused.

MR GRAY:	I seek an order for costs, if the Court pleases.
MR MANSFIELD:	I cannot resist that, Your Honour.

HIS HONOUR: It is refused with costs.

MR GRAY:

Your Honour, that does leave the application with

regard to substitution. We seek an order for costs
in that respect, but Your Honour might take the
view they should abide the fate of the whole

application. We say that is a matter that came
about on which we gave notice at day 1, and my
friend had to make that application through their
mistake and we should have the costs of that.

Filmer

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HIS HONOUR:

You get the costs of the proceedings, do you

not, so that would include that, would it not?

MR GRAY:	Yes, it would, yes.
HIS HONOUR:	You do not require anything else, do you,

gentlemen, certificates or - if a certificate is
necessary, I will grant it.

AT 5.15 PM THE MATTER WAS ADJOURNED SINE DIE

Pilrner

47

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Key Legal Topics

Areas of Law

Insolvency
Commercial Law
Civil Procedure

Legal Concepts

Appeal
Jurisdiction
Procedural Fairness
Standing
Stay of Proceedings

Actions

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Citations

Pilmer & Ors v The Duke Group Limited (In Liquidation) [1994] HCATrans 216

Cases Citing This Decision

0

Cases Cited

1

Statutory Material Cited

0

Bridge Shipping Pty Ltd v Grand Shipping SA [1991] HCA 45

purported proceedings are simply incompetent.	Now,
this is a point that we wrote, on 25 January,

happened. We aren't in a position to consent.	If
you provide to us reasons, we will reconsider the
matter."	We have not heard since.

opposed because it would be to seek to substitute	say is the proper course to be taken, it would be	in an "out of time" action and when the Court comes
to consider this application being out of time, it is our case, if Your Honour pleases, that a deliberate decision was made to wait to the last
day to issue the application. The intention was to
issue it on the twenty first day because of certain
commercial advantages that follow from the delays
in the matter. In fact, apparently, there is an
affidavit of an article clerk, saying that she
miscounted.

merits if required.	But we do say Your Honour has
no jurisdiction.

of misjoinder or non-joinder of parties, and	the Court or a Justice may deal with the
matter in controversy so far as regards the
rights and interests of the parties actually
before it or him.

have to come back with a further application.	I am
not sure if Your Honour made that order that he

right parties and then the matter can proceed.	We
do want to take a bare technicality for a moment

notice to expect us to argue the matter fully.	It
is a point that we have repeated to the courts
below, that we say that this matter is not
competent.

within the framework of that other action.	But
The Duke Group (In Liquidation) is never a party to

that since 24 December when they told us at the
Master's hearing.	Our concern has been that they

Liquidation). They got it wrong.	They made a
mistake about the party to be sued.

et cetera.	Now, other matters are being all
cleaned up.	The only outstanding matter between

to proceed in May without this information.	But
that is an election we do not want to make.	If
Your Honour pleases, that is why delay is so

parties in the judgment in which it is sought to	appeal was given.
Whilst I have criven careful attention to the matters which were r2ferred to by Mr Gray, it does
not seem to me that they should preclude those
represented by Mr Mansfield from correcting what does appear to me to be an error or, in the terms
of Order 16 rule 3, "a bona fide mistake". It
seems to me that this proceeding, that is the
proceeding which is the application for special
leave, was commenced in the name of wrong persons
and that there having been a bona fide mistake it
is necessary for the determination of the real
matter in dispute to substitute different parties

as at the moment advised, what this turns on.	So,
perhaps you could address yourself to that.

observation.	I see in a recent case of Rahme
Justice Deane may have been suggesting that the

fully as he can into the mind of the company.	If,
as the cases say, that gives him an advantage in
litigation then, so be it, but the section is
necessary to put him, as it were, in the mind of

case which is helpful to the application for leave.	aware and in this case. In our submission, it is a	If Your Honour has had an opportunity of having a
look at Kelly v Murphy - - -

likely to continue to do.	If the Court pleases,
that is our submissions.

Your Honour to it -	in the Kelly case was quite
different.	The purpose there was confined in the

[1994] HCATrans 216

Key Legal Topics

Areas of Law

Insolvency

Commercial Law

Civil Procedure

Legal Concepts

Appeal

Jurisdiction

Procedural Fairness

Standing

Stay of Proceedings

the company.	Those are things which simply do not
concern a normal litigant.	What you are really