Powell & Anor - [2019] SASC 63

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
POWELL & ANOR
[2019] SASC 63
Judgment of Judge Dart a Master of the Supreme Court
24 April 2019
CORPORATIONS - EXAMINATIONS RELATING TO INSOLVENCY - PROCEDURAL MATTERS - LIQUIDATOR'S AFFIDAVIT
Liquidators apply pursuant to s 596A and s 596B of the Corporations Act 2001 for examination summonses - examinees apply to set aside the summonses - preliminary issue - ReturnToWorkSA provided witness statements - liquidators relied in part on witness statements when applying for examination summonses - examinees say unlawful for ReturnToWorkSA to provide the witness statements to the liquidators.
Held: ReturnToWorkSA were entitled to provide the witness statements to the liquidators.
Corporations Act 2001 (Cth) s 9, s 506, s 530A, s 596A, s 596B, s 596C, s 597(9); Return to Work Act 2014 (SA) s 183, s 185; The Companies Act of 1961 (Qld), referred to.
Emanuele & Anor v Emanuel Investments & Ors (1996) 21 ACSR 83; Rees & Anor v Kratzmann (1965) 114 CLR 63, considered.

POWELL & ANOR
[2019] SASC 63
JUDGE DART:

These reasons deal with the question of whether the provision of witness statements to the plaintiffs by ReturnToWorkSA (“RWSA”) was lawful. It was.
Background
The plaintiffs are the joint liquidators of Ticon Group Pty Ltd (in liquidation) (“Ticon”). On 14 November 2018 they applied to the Court[1] for orders pursuant to s 596A, s 596B and s 597(9) of the Corporations Act 2001 (Cth) (“the Act”). The application sought orders to examine a number of people in relation to the affairs of Ticon. It also sought to have a company called Australian Labour Hire Pty Ltd (“ALH”) produce specified documents on the examination.
[1] Originating Process, FDN1.
An order pursuant to s 596A is mandatory, but an order pursuant to s 596B is discretionary. The orders sought by the plaintiffs were made on 23 November 2018. The plaintiffs supported the application by filing an affidavit in compliance with s 596C of the Act.[2] The Act provides that the affidavit is not available for inspection, except so far as the Court orders. It is not usual to permit inspection.
[2] Affidavit of Christopher Robert Powell filed 14 November 2018, FDN2.
The plaintiffs subsequently filed an open affidavit which disclosed that Ticon conducted a labour hire business.[3] The banking records for Ticon show that it maintained two accounts with ANZ Bank. For the 12-month period commencing December 2014 transactions totalling $48 million were processed through those bank accounts. There was a related company, R C Commercial Business Consulting Pty Ltd (“Commercial”). The sum of approximately $4.5 million was transferred to Commercial during that period. It is the view of the plaintiffs that there was an intermingling of the affairs of Ticon and Commercial.
[3] Affidavit of Christopher Robert Powell filed 14 January 2019, FDN19.
Subsequently, it seems that the business of Ticon was taken over by ALH. The plaintiffs suspect phoenix activity. The proposed examinees are Robert Cammarano, Daniel Idropico and Delilah Idropico who appear to have been involved with Ticon, Commercial and/or ALH. The orders in respect of each of them was made pursuant to s 596B.
Each of the examinees and ALH have filed interlocutory applications.[4] The applications seek access to the s 596C affidavit, and also seek the setting aside of the examination orders. There are currently eight interlocutory applications before the Court. That is unusual.
[4] Application of Daniel Idropico filed 5 December 2018, FDN10; application of Robert Cammarano filed 5 December 2018, FDN11; application of Delilah Idropico filed 5 December 2018, FDN12 and application of Australian Labour Hire Pty Ltd filed 7 December 2018, FDN14.
The principal creditors of Ticon include RWSA, which has lodged a proof of debt in the amount of $953,184.55. That claim is for unpaid workers’ compensation premiums over a period of several years. The Australian Taxation Office has lodged a proof of debt in the amount of $110,967.82.
The involvement of RWSA
Prior to Ticon entering into administration and subsequent liquidation, RWSA was conducting an investigation into the non-payment of workers’ payment premiums by it. The investigation involved, in part, the taking of witness statements from a number of individuals. The Return to Work Act 2014 (SA) (“RWA”) grants investigative powers to that organisation. The provisions are found in s 183:
183—Powers of entry and inspection
(1)For the purposes of this Act, an authorised officer may, at any reasonable time—
(a)enter any workplace;
(b)inspect the workplace, anything at the workplace and work there in progress;
(c)require a person who has custody or control of books, documents or records relevant to any matter arising under this Act to produce those books, documents or records;
(d)examine, copy and take extracts from any such books, documents or records, or require an employer to provide a copy of any such books, documents or records;
(e)take photographs, films or video or audio recordings;
(f)take measurements, make notes and records and carry out tests;
(g)require (directly or through an interpreter) any person to answer, to the best of that person's knowledge, information and belief, any question relevant to any matter arising under this Act;
(h)require an employer to produce any document, or a copy of any document, that is required to be prepared or kept under this Act;
(i)seize any document that has been mistakenly provided by the Corporation under this Act.
(2)If—
(a)a person whose native language is not English is suspected of having breached this Act; and
(b)the person is interviewed by an authorised officer in relation to that suspected breach; and
(c)the person is not reasonably fluent in English,
the person is entitled to be assisted by an interpreter during the interview.
(3)A person is not required—
(a)to provide information under this section that is privileged on the ground of legal professional privilege; or
(b)to answer a question under this section if the answer would tend to incriminate that person of an offence.
(4)An authorised officer, who suspects on reasonable grounds that an offence against this Act has been committed, may seize and retain anything that affords evidence of that offence.
(5)An authorised officer must, at the request of any person from whose possession evidentiary material is seized under subsection (4), provide a receipt for that material.
(6)Where anything has been seized under subsection (4) the following provisions apply:
(a)the thing seized must be held pending proceedings for an offence against this Act related to the thing seized, unless the Minister, on application, authorises its release to the person from whom it was seized, or any person who had legal title to it at the time of its seizure, subject to such conditions as the Minister thinks fit (including conditions as to the giving of security for satisfaction of an order under paragraph (b)(ii));
(b)where proceedings for an offence against this Act relating to the thing seized are instituted within 6 months of its seizure and the person charged is found guilty of the offence, the court may—
(i)order that it be forfeited to the Crown; or
(ii)where it has been released pursuant to paragraph (a)—order that it be forfeited to the Crown or that the person to whom it was released pay to the Minister an amount equal to its market value at the time of its seizure, as the court thinks fit;
(c)where—
(i)proceedings are not instituted for an offence against this Act relating to the thing seized within 6 months after its seizure; or
(ii)proceedings having been so instituted—
(A)the person charged is found not guilty of the offence; or
(B)the person charged is found guilty of the offence but no order for forfeiture is made under paragraph (b),
the person from whom the thing was seized, or any person with legal title to it, is entitled to recover from the Minister, by action in a court of competent jurisdiction, the thing itself, or if it has deteriorated or been destroyed, compensation of an amount equal to its market value at the time of its seizure.
(7)In the exercise of powers under this section, an authorised officer may be accompanied by such assistants as may be necessary or desirable in the circumstances.
(8)An employer whose workplace is subject to an inspection under this section must provide such assistance as may be necessary to facilitate the exercise of the powers conferred by this section.
(9)A person must not—
(a)hinder or obstruct an authorised officer in the exercise of a power conferred by this section; or
(b)refuse or fail, without lawful excuse, to comply with a requirement under this section.
Maximum penalty: $10 000.
(10)An authorised officer, or a person assisting an authorised officer, who in the course of exercising powers under this section in relation to an employer—
(a)unreasonably hinders or obstructs the employer in the day to day running of his or her business;
(b)addresses offensive language to the employer or to any other person at the workplace;
(c)assaults the employer or any other person at the workplace,
is guilty of an offence.
Maximum penalty:
(a)for an offence against paragraph (a) or (b)—$5 000;
(b)for an offence against paragraph (c)—$5 000 or imprisonment for 1 year.
The information gathered by RWSA is treated as confidential. Relevantly, s 185 of the RWA provides:
185—Confidentiality to be maintained
(1)A person must not disclose information (except as permitted by subsection (3)) if—
(a)the person obtained the information in the course of carrying out functions in, or in relation to, the administration, operation or enforcement of this Act; and
(b)the information is—
(i)about commercial or trading operations; or
(ii)about the physical or mental condition, or the personal circumstances or affairs, of a worker or other person; or
(iii)information provided in a return or in response to a request for information under this Act.
Maximum penalty: $10 000.
(2)The Corporation may enter into arrangements with corresponding workers compensation authorities about sharing information obtained in the course of carrying out functions related to the administration, operation or enforcement of this Act or a corresponding law.
(3)A disclosure of information is permitted if it is—
(a)a disclosure in the course of official duties; or
(b)a disclosure of statistical information; or
(c)a disclosure made with the consent of the person to whom the information relates, or who furnished the information; or
(d)a disclosure made to a corresponding workers compensation authority in accordance with an arrangement entered into under subsection (2); or
(e)a disclosure authorised or required under any other Act or law; or
(f)a disclosure required by a court or tribunal constituted by law, or before a review authority; or
(g)a disclosure to the Corporation or a self-insured employer; or
(h)a disclosure to an injured worker's employer in accordance with this Act; or
(i)a disclosure to the Lifetime Support Authority of South Australia (the LSS Authority)—
(i)for purposes associated with the operation of section 176 of this Act, section 55 of the Motor Vehicle Accidents (Lifetime Support Scheme) Act 2013, or an agreement envisaged by those sections; or
(ii)without limiting subparagraph (i), so that the LSS Authority may provide services and exercise powers and discretions under this Act or the Motor Vehicle Accidents (Lifetime Support Scheme) Act 2013; or
(j)a disclosure made under the authorisation of the Minister; or
(k)a disclosure authorised by regulation.
(4)A regulation made for the purposes of subsection (3)(k) cannot take effect unless it has been laid before both Houses of Parliament and—
(a)no motion for disallowance is moved within the time for such a motion; or
(b)every motion for disallowance of the regulation has been defeated or withdrawn, or has lapsed.
(5)In this section—
corresponding workers compensation authority means any person or authority in another State or a Territory of the Commonwealth with power to determine or manage claims for compensation for injuries arising from employment.
The issue in hand
These reasons deal with one issue only, which relates to the operation of s 185 of the RWA. An officer of RWSA provided copies of witness statements, obtained by it during the course of its investigation of Ticon, to the liquidators. That occurred on two separate occasions, namely 15 March 2016 and 6 December 2016. The examinees say that those statements were confidential and should not have been disclosed. They submit that the disclosure was unlawful. The examinees say that the disclosure infected the exercise of the Court’s s 596B discretion. The issue is whether the provision of the witness statements was lawful or not.
The nature of a liquidator’s examination
To give context, it is necessary to consider the nature of proceedings such as this. We are not dealing with normal inter partes proceedings. The appointment of a liquidator in a voluntary winding up gives the liquidator power to conduct the affairs of the company being wound up.[5] Officers of the company being wound up must cooperate with the liquidator and act at the direction of the liquidator.[6] A liquidator is an officer of the company of which he is the liquidator.[7] At the time that RWSA provided the statements to the plaintiffs they were officers of Ticon and controlling its affairs. The position is therefore the same as if RWSA had provided the statements to Ticon itself.
[5] Section 506 of the Corporations Act 2001.
[6] Section 530A of the Corporations Act 2001.
[7] Section 9 of the Corporations Act 2001.
An examination conducted under the Act is not an inter partes proceeding. It is a unique proceeding. The particular nature of the proceedings were explained in Emanuele & Anor v Emanuel Investments & Ors by Debelle J who said: [8]
In the circumstances of this case, it is significant that an examination is unlike the usual form of judicial proceedings in that it does not affect the rights of the examinee in any direct sense. Examinations under s 596A and s 596B of the Corporations Law are not the usual form of judicial proceedings. There is no dispute between parties which has been submitted to the court for its adjudication. At the conclusion of the examination, the judicial officer before whom the examinations have been conducted is not required to determine the respective rights and obligations of the parties. The judicial officer does not make an order, publish reasons for judgment, or make any report or recommendations. The examination is simply an investigation in the form of a series, sometimes a lengthy series, of questions and answers in which the liquidator of a company or other persons authorised by s 597(5A) seek to gather information in relation to the affairs of the relevant corporation: Douglas-Brown v Furzer (1994) 11 WAR 400; 13 ACSR 184; 12 ACLC 288, 292. All that results is a record of the examination in the form of the transcript.
…
It is well settled that the procedure is inquisitorial in nature. The power to ask questions at an examination is extremely wide. There is a dual public purpose in conducting an examination. The first is to enable a liquidator to gather information to assist in the winding up and thereby protect the interests of creditors. The second is to enable evidence and information to be gathered to support the bringing of criminal charges in connection with the company’s affairs: Hamilton v Oades (1989) 166 CLR 486; 85 ALR 1; 15 ACLR 123, at CLR 496.
[8] (1996) 21 ACSR 83 at 94-95.
The powers given to a liquidator to investigate the affairs of a company are broad. That is justified by the public interest in having the affairs of insolvent companies properly investigated. In Rees & Anor v Kratzmann[9] the High Court was dealing with the scope of the examination power under The Companies Act of 1961 (Qld). Windeyer J said:[10]
The example, a debtor upon his public examination in bankruptcy cannot refuse to answer questions on the ground that the answers may incriminate him (Re Paget; Ex Parte Official Receiver;[11] Re Jawett,[12] the purpose of the bankruptcy statute being to secure a full and complete examination and disclosure of the facts relating to the bankruptcy in the interests of the public. The provisions of The Companies Act reflect, it seems to me, the same idea. The honest conduct of the affairs of companies is a matter of great public concern to-day. If the legislature thinks that in this field the public interest overcomes some of the common law’s traditional consideration for the individual, then effect must be given to the statute which embodies this policy. As the law stood in the past the mere summoning of a person to attend a public examination in a winding up necessarily carried a suggestion that he was in some way connected with a fraud. But the wider scope and purpose of the present section makes such an inference unjustifiable.
[9] (1965) 114 CLR 63.
[10] Rees & Anor v Kratzmann (1965) 114 CLR 63 at 80.
[11] [1927] 2 Ch. 85.
[12] [1929] 1 Ch. 108.
The same considerations inform the use of the powers in the Act. The nature of the proceedings and the public interest may be relevant in the event that the provision of the witness statements was unlawful.
The argument of the examinees
The main argument advanced by the examinees is that the provision of the witness statements to the plaintiffs was not permitted by s 185(3). It follows that the disclosure was unlawful and the examinees say that should lead the Court to set aside the examination summonses. Depending on the finding, the consequences of unlawful disclosure are to be argued on a later occasion. There is a secondary argument advanced by the examinees which proceeds on the basis that, if the disclosure was authorised, the disclosure was not made under the appropriate authorisation in any event.
The RWA, in s 185(1), creates an offence in respect of the disclosure of information punishable by a maximum penalty of $10,000. It is not an offence to make a disclosure of information in the circumstances permitted by s 185(3). That sub-section refers to a number of situations in which disclosure of information is permitted. Section 185(3)(a), for example, provides that a disclosure of information is permitted if it is in the course of official duties. That would appear to be a quite wide provision. It might be argued that the provision of the witness statements to the plaintiffs was in the course of the official duties of the officer who provided the statements. The plaintiffs, however, do not seek to defend the disclosure on that basis. It should be noted that RWSA was not represented on the argument.
The provision relied upon by the plaintiffs is s 185(3)(j), which permits a disclosure made under the authorisation of the Minister. An officer of RWSA swore an affidavit which exhibited two ministerial authorisations. The first is dated 3 November 2015. The authorisation is in the following terms:[13]
[13] Affidavit of William Scott Willoughby sworn 1 February 2019, FDN27, Exhibit 27B.
It is recommended that—
1. you authorise the disclosure of information under section 185(3)(j) of the Return to Work Act 2014 in relation to investigations into labour hire practices and/or investigations to identify whether parties supplying labour are properly characterised as contractors, where disclosure would potentially facilitate—
•the investigation of non-payment or underpayment of premiums due to ReturnToWorkSA or of amounts due to any other State or federal regulatory authority, or
•the investigation or prosecution of breaches of the RTWA or regulations under the RTWA, or the Work Health and Safety Act 2012 or regulations under that Act, or
•the investigation or prosecution of breaches of the Fair Work Act 2009 or any regulation under that Act, or
•the investigation or prosecution of breaches of any law or regulation administered by a regulatory authority, or
•the recovery of premiums or other money due to ReturnToWorkSA.
2. That this authorisation expires on 30 June 2016.
The [then] Minister for Industrial Relations, on 3 November 2015, accepted the recommendation and made the authorisation.

There was a second authorisation on 28 June 2016. The Minister accepted and approved the following authorisation:[14]
[14] Affidavit of William Scott Willoughby sworn 1 February 2019, FDN27, Exhibit 27B.
It is recommended that—
3. you authorise the disclosure of information under section 185(3)(j) of the Return to Work Act 2014 in relation to investigations into labour hire practices, potential illegal phoenix activity, dishonest practices and premium avoidance activity where disclosure would or would potentially facilitate—
•the investigation of non-payment or underpayment of premiums due to ReturnToWorkSA or of amounts due to any other State or Federal regulatory authority, or
•the investigation or prosecution of breaches of the RTWA or regulations under the RTWA, or the Work Health and Safety Act 2012 or regulations under that Act, or
•the investigation or prosecution of breaches of the Fair Work Act 2009 or any regulation under that Act, or
•the investigation or prosecution of breaches of any law or regulation administered by a State or Federal regulatory authority, or
•the recovery of premiums or other money due to ReturnToWorkSA.
4. This authorisation expires on 30 June 2018.
Each of the recommendations put to the Minister and approved by him were at the end of a two-page memorandum. Each of the memoranda set out the purpose for which ministerial authorisation was sought. The second was expressly seeking an extension of the first authorisation, although the recommendation is in slightly different terms. The memos contain under the heading “Overview” an explanation of what RWSA has been investigating and the reason for those investigations. The two authorisations are relevant because a disclosure was purportedly made under each one.
The first authority permits disclosure where such disclosure would potentially facilitate the investigation of the non-payment or under-payment of premiums, or assist with the recovery of such premiums due to RWSA. Those are matters which are the subject of proper investigation by the plaintiffs and will form part of the examinations. The very nature of the role of a liquidation is to investigate the conduct of a company’s affairs and to seek to provide a return to creditors. On the face of the first authorisation, the disclosure of witness statements to the liquidator on 15 March 2016 would appear to be justified and fall properly within the terms of the authorisation.
The second recommendation is in broader terms. It authorises disclosure of information in relation to potential illegal phoenix activity and premium avoidance in circumstances where such disclosure would potentially facilitate investigation of non-payment or underpayment of premiums and the recovery of premiums. The provision of a second witness statement to the liquidators on 6 December 2016 would appear to fall within the scope of the second authorisation.
The argument of the examinees is that each of the two memoranda to the Minister should be read as a whole. That is, the purpose and overview provisions should be taken to inform the interpretation of the authorisation.
In respect of the first authorisation, there was mention of a meeting two days after the date of the memorandum between RWSA and two other government entities. There was discussion of a need to share information, to achieve more effective regulatory enforcement. The examinees say that the first authorisation should be read down to permit disclosure to other regulatory authorities only. They say a liquidator is not a regulatory authority. They make the same submission in respect of the second authorisation.
I regard it as plain that the provision of documents to the liquidator falls within the express words of each of the authorisations. It must be borne in mind that, if the disclosure was not permitted, a criminal offence may have been committed. There is a need for clarity and certainty. To accept the argument of the examinees, it is necessary to read down the words of the authorisation by adding words of limitation. That is not appropriate or necessary. The need to look beyond the express words of the authorisations would create uncertainty.
The examinees have a secondary argument, which is that the disclosure must be “made under” an authorisation. A distinction is drawn between s 185(3)(j) and (k). They submit the Court cannot be satisfied that the disclosures made by the officer of RWSA were “made under” the Ministerial authorisations. I do not accept that argument. The officer of RWSA deposed to the fact that he was aware of each of the authorisations, that the purpose of providing the statements to the plaintiff was to facilitate investigation of the non‑payment of premiums due to RWSA by Ticon and, further, to assist in the recovery of such premiums. He further deposed to the belief that he was authorised to disclose the witness statements pursuant to each of the two authorisations.
I am satisfied that the officer of RWSA was permitted by the terms of the Ministerial authorisations to disclose the witness statements to the plaintiff on each of the occasions he did so. The disclosures were not unlawful.