Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd (No. 2)

[2015] NSWSC 1857

Supreme Court

New South Wales

Medium Neutral Citation:

Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd (No. 2) [2015] NSWSC 1857

Hearing dates:

2 December 2015

Date of orders:

07 December 2015

Decision date:

07 December 2015

Before:

Adamson J

Decision:

1. Dismiss the defendant’s notice of motion filed 24 November 2015.

 

2. Unless an application for a different order is made in writing to my Associate within seven days, order the defendant to pay the plaintiff’s costs of the notice of motion.

 3. Grant liberty to the plaintiff to approach the Registrar to obtain, in consultation with the defendant, a date for the hearing of the examination ordered by the Registrar on 22 September 2015.

Catchwords:

CIVIL LAW – enforcement of judgments – examination orders – application for examination order to be set aside – whether failure to make full and frank disclosure at the time of ex parte application for examination order – whether legitimate forensic purpose for documents sought under examination order –examination by judgment creditor is not analogous to liquidator’s examination – no material non-disclosure in present case – examination for a proper purpose – application dismissed

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW)
Building and Construction Industry Security of Payment Act 2004 (Singapore), s 21
Civil Procedure Act 2005 (NSW), s 108
Corporations Act 2001 (Cth), ss 596A, 596B, 596C
Criminal Appeal Act 1912 (NSW), s 5F
Foreign Judgments Act 1991 (Cth), s 6
Uniform Civil Procedure Rules 2005 (NSW), rr 38.1, 38.2, Pt 53

Cases Cited:

Attorney-General for New South Wales v Chidgey [2008] NSWCCA 65
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; 78 NSWLR 393
Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512
Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd [2015] NSWSC 1833
Re Owston Nominees No. 2 Pty Ltd [2013] NSWSC 538
Re Mendarma Pty Ltd (in liquidation) [2006] NSWSC 1306
Re Southern Equities Corporation Ltd (in liquidation); Bond and another v England (1997) 25 ACSR 394
Sutherland v Pascoe, in the matter of Matrix Group Ltd as Trustee for the Matrix Group Unit Trust (in liq) ACN 061 549 371 (No 2) [2012] FCA 1361
Wainter Pty Ltd, in the matter of New Tel Limited (in liq) ACN 009 068 955 [2005] FCAFC 114; 145 FCR 76

Category:

Procedural and other rulings

Parties:

Quadunion Builders Pte Ltd (Plaintiff)
Aircraft Support Industries Pty Ltd (Defendant)

Representation:

Counsel:
R de Meyrick (Plaintiff)
D Allen (Defendant)

    Solicitors:
Lovegrove Smith & Cotton (Plaintiff)
Tomaras Lawyers (Defendant)

File Number(s):

2015/81611

Judgment

Introduction

1. By notice of motion filed on 24 November 2015, Aircraft Support Industries Pty Ltd (the defendant) seeks to have the examination order made on 22 September 2015 set aside; or, in the alternative, an adjournment of the hearing of the examination which was listed to take place on 2 December 2015.

2. The defendant challenges the examination order on the ground that Quadunion Builders Pte Ltd (the plaintiff) failed to make full and frank disclosure to the Court when the application, which was made ex parte, was made.

Background facts

3. On 14 August 2014 a determination was made following an adjudication of a dispute between the plaintiff and the defendant. The adjudication was made under the Singaporean Building and Construction Industry Security of Payment Act 2004 (the Singapore Security of Payment Act), which follows broadly similar lines to its New South Wales equivalent, the Building and Construction Industry Security of Payment Act 1999 (NSW) (the NSW Security of Payment Act). The Adjudicator determined that the defendant pay the plaintiff the sum of S$1,508,323.75 plus costs and interest (the Adjudication Determination).

4. On 3 September 2014 a judgment (which reflected the Adjudication Determination) was entered in favour of the plaintiff against the defendant in the High Court of the Republic of Singapore (the Singapore Judgment).

5. The plaintiff commenced garnishee proceedings against the defendant to recover the amount owing. A sum of S$635,855.14 was paid out of the defendant’s bank accounts in reduction of the amount.

6. On 8 December 2014, on the basis of the Singapore Judgment, the plaintiff served on the defendant a statutory demand pursuant to s 459E(2)(e) of the Corporations Act 2001. The debt of S$899,237.10 was described as follows:

“Balance of Judgment debt in the High Court of the Republic of Singapore Case No OS841/2014 dated 3 September 2014 (including accrued interest to 7 November 2014) S$1,535,073.90 less payment to date of S$635,836.84.”

7. On 24 December 2014 the defendant filed an originating process in the Federal Court of Australia for an order setting aside the statutory demand. Mark Langbein, the defendant’s managing director, swore an affidavit on 23 December 2014 in support of the application. Mr Langbein deposed to a claim (described as an offsetting claim) made by the defendant against the plaintiff, which was alleged to be in the sum of S$1,119.19 plus unliquidated damages, which was the subject of an arbitration proceedings in the International Chamber of Commerce in Singapore (ICC) (the Defendant’s Arbitration). Mr Langbein also deposed:

“[7]   The Plaintiff does not dispute the validity [of] the judgment of the High Court of the Republic of Singapore on which the Statutory Demand purports to be founded.

. . .

[10]   The Statutory Demand served on the Plaintiff was not accompanied by an affidavit verifying the debt upon which it is founded, as required by section 459E(3) of the Corporations Act 2014 (Cth). It is submitted that the High Court of the Republic of Singapore judgment upon which the Statutory Demand is founded is not a ‘judgment’ within the meaning of section 9 of the Corporations Act, in that it is not a judgment of a Federal, State or Territory court.”

8. On 12 February 2015 consent orders were made by the Federal Court setting aside the statutory demand.

9. On 20 March 2015 this Court registered a foreign judgment under the Foreign Judgments Act 1991 (Cth) for the sum of S$915,442.28 (comprising the sum of $882,776.91 together with interest of $32,665.37) plus $3,719 for costs. The amount outstanding comprised the amount of the Singapore Judgment less amounts paid as a result of the garnishee order. By operation of s 6 of the Foreign Judgments Act and Part 53 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the registration of the Singapore Judgment became a judgment of this Court (the Judgment) and had the same force and effect for the purposes of enforcement as a judgment originally given in this Court: s 6(7) of the Foreign Judgments Act.

10. On 20 April 2015 the defendant commenced arbitral proceedings in Singapore against the plaintiff (the Defendant’s Arbitration). Its statement of case included the following claims:

1. a claim for damages for defective works (past and future) of S$1,266,943.10;

2. a claim for damages for delay of S$580,793.95; and

3. a claim to revisit the Adjudication Determination (which had resulted in the entry of the Singapore Judgment).

11. By notice of motion filed on 22 April 2015 in this Court the defendant sought that the Judgment be set aside, or, in the alternative, stayed. The motion was heard by Adams J on 28 May 2015. The defendant relied on three grounds: the Judgment was contrary to public policy; the Judgment was subject to an off-setting claim in excess of the judgment; and the defendant had commenced an arbitration which was effectively an appeal against the basis for the Judgment.

12. Justice Adams dismissed the notice of motion on 28 May 2015 and delivered ex tempore reasons. Justice Adams made an order refusing the stay of the Judgment and ordering the applicant (defendant) to pay the respondent’s (plaintiff’s) costs. A copy of his Honour’s reasons (Quadunion Builders Pte Ltd v Aircraft Support Industries Pty Ltd [2015] NSWSC 1833) was not made available until 3 December 2015, after the hearing of the present application. I invited the parties to make any further submissions in light of the reasons; however, no further submissions were forthcoming.

13. On 8 June 2015 the Arbitral Tribunal in Singapore (consisting of a single arbitrator) for the Defendant’s Arbitration made directions for a procedural timetable and fixed the hearing of the arbitration for five days from 1 to 5 February 2016.

14. By examination notice dated 12 June 2015, the plaintiff required the defendant to complete the signed examination notice and produce the documents sought by 14 July 2015.

15. The completed examination notice, which was signed by David Pearson, who identified himself as the Chief Financial Officer of the defendant, included the following answers (which are italicised below):

“INCOME

Estimated gross income of business         $50,000,000

Nature of business   AIRCRAFT HANGAR DESIGN AND CONSTRUCTION

. . .

“What arrangements is [sic] the company prepared to make to pay this debt?

NONE. ARBITRATION ON FOOT IN SINGAPORE. JUDGEMENT [SIC] DEBTOR’S CLAIM IS IN EXCESS OF JUDGEMENT DEBT.

Does anyone owe you money? Give details of person or institution from which it is owed, amount and the basis on which it is being repaid.

NO.”

16. On 16 September 2015 the plaintiff filed a notice of motion for an examination order. The motion was supported by an affidavit of Emily Martins affirmed on 14 September 2015. Ms Martins deposed that the Judgment remained wholly unsatisfied. Ms Martins did not annex the completed examination notice to her affidavit. However, she paraphrased its contents in part, including the following:

“[12]   The first page of the completed Examination Notice under the heading Financial Statement, stated that the estimated gross annual income of Aircraft was said to be $50,000,000.00.”

17. Ms Martins also deposed:

“23   Despite ASI claiming to earn an estimated gross annual income of $50 million, the documents provided to LSC show no assets or income. This appears to indicate a lack of transparency in the documentation provided.

24   Accordingly, I verily believe that there is unsatisfactory and insufficient answers and/or production of documents provided by ASI and an Examination Order should be granted in the circumstances.

…

28   The judgment debt is not stayed by an order of the court or an instalment order.”

18. The Registrar made the examination order on 22 September 2015. It required Mr Langbein to do the follows:

“1. Attend court to be examined as to whether any and, if so, what debts are owing to the judgment debtor and whether the judgment debtor has any and, if so, what other property or other means of satisfying the judgment.

2. Produce to the court the following documents or things that are in the judgment debtor’s possession or control: (in his capacity as Chief Financial Officer of the Defendant):

Income tax assessments;

Bank Statements;

Credit Card Statements;

Loan Statements;

Audited Accounts;

Annual Reports;

Monthly Income and Expense Statements;

Profit and Loss Statements;

Business Activity Statements; and

Taxation Returns-

for the past 2 years.

WHEN AND WHERE TO ATTEND COURT

Date      28 October 2015

Time      11:00AM

Place      Supreme Court Sydney

If you do not attend court on this date at this time and place, you may be arrested.”

Relevant legislative provisions

The Singapore Act

19. The defendant tendered the Singapore Security of Payment Act, the long title of which is:

“An Act to facilitate payments for construction work done or for related goods or services supplied in the building and construction industry, and for matters connected therewith.”

20. Section 21(1)(b) of the Singapore Security of Payment Act provides:

“Effect of adjudication determinations and adjudication review determinations

21. – (1) An adjudication determination made under this Act shall be binding on the parties to the adjudication and on any person claiming through or under them, unless or until –

…

(b) the dispute is finally determined by a court or tribunal or at any other dispute resolution proceedings; or

. . .”

Civil Procedure Act 2005 (NSW)

21. Section 108 of the Civil Procedure Act 2005 (NSW) provides:

“108 Order for examination

(1) The court may, subject to and in accordance with the uniform rules, make an order requiring a person bound by a judgment or order:

(a) to attend the court to be orally examined as to any material question, or

(b) to produce any document or thing that is in his or her possession and that relates to a material question.

(2) An order under this section with respect to a person that is a corporation:

(a) may be addressed to any officer or former officer of the corporation, and

(b) binds any such officer or former officer as if he or she were the person bound by the judgment or order.

(3) Without limiting subsection (1), the uniform rules may require the judgment creditor under a judgment debt to have attempted to obtain information as to the judgment debtor’s financial circumstances (whether by means of a notice requiring the judgment debtor to supply such information or otherwise) before the judgment creditor may apply for an order under this section.

. . .

(5) For the purposes of this section, the material questions in relation to a judgment or order are:

(a) to the extent to which it requires the person bound by it to pay money:

(i) questions as to whether any and, if so, what debts are owing to that person, and

(ii) questions as to whether that person has any and, if so, what other property or other means of satisfying the judgment or order, and

(b) to the extent to which it does not require the person bound by it to pay money, such questions concerning or in aid of the enforcement or satisfaction of the judgment or order as may be specified in the order under this section.”

Uniform Civil Procedure Rules 2005 (NSW)

22. Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 38.1 entitles a judgment creditor to serve an examination notice on the judgment debtor in accordance with an approved form. UCPR 38.2 provides, so far as is relevant to judgments of this Court:

“38.2 Application for order for examination

(1) An application for an order for examination with respect to the enforcement of a judgment or order must be supported by an affidavit as to the following matters:

(a) that the judgment or order remains unsatisfied,

. . .

(d) in the case of a judgment or order for the payment of money, whether or not an instalment order has previously been made in relation to the amount payable under the judgment or order and, if such an order has been made, that the person bound by the judgment or order has failed to comply with the instalment order.

. . .

(3) Unless the court otherwise orders, an application under this rule:

(a) may be dealt with in the absence of the parties, and

(b) need not be served on the person bound by the judgment or order.”

The parties’ submissions

The applicant/defendant’s submissions

23. Mr Allen, who appeared on behalf of the defendant, submitted that the Registrar’s order ought be set aside on the ground that the plaintiff, when it applied for an examination order, was not “full and frank” with the Court. He relied on several authorities which concerned summons filed on behalf of liquidators for examinations and orders for production under ss 596A and 596B of the Corporations Act 2001 (Cth) (or their statutory equivalents), including: Re Southern Equities Corporation Ltd (in liquidation); Bond and another v England (1997) 25 ACSR 394 (Cox, Lander and Bleby JJ); Re Mendarma Pty Ltd (in liquidation) [2006] NSWSC 1306 (White J) and Re Owston Nominees No. 2 Pty Ltd [2013] NSWSC 538 (Black J). He submitted that any difference between the examination order in the present case and a liquidator’s examination was “a difference of no importance”.

24. In its written submissions the defendant contended that the plaintiff had failed to disclose to the Registrar the following matters.

1. the judgment debt arose by registration of a judgment of the High Court of Singapore pursuant to s 6 of the Foreign Judgments Act 1981 (Cth);

2. the Singapore judgment was ordered following the making of the Adjudication Determination under the Singapore Security of Payment Act;

3. since the Adjudication Determination the defendant had commenced arbitral proceedings against the plaintiff;

4. the defendant’s claim in the Defendant’s Arbitration included a claim that the money payable under the Adjudication Determination was not in fact payable, as well as rectification costs and liquidated damages;

5. the defendant’s claim against the plaintiff for rectification costs and liquidated damages exceeded the Adjudication Determination;

6. the Defendant’s Arbitration is listed for hearing commencing 1 February 2016;

7. the plaintiff issued a statutory demand for payment of the Singapore Judgment which was set aside by consent; and

8. the plaintiff is based in Singapore and has no assets in Australia.

25. The defendant also criticised the plaintiff for not annexing the completed examination notice (which would have revealed the Defendant’s Arbitration) to its affidavit in support of its application for an examination order. The defendant did not press its written submission that the plaintiff failed to disclose that the plaintiff and the defendant were competitors in Singapore.

26. Mr Allen submitted as follows:

1. a judgment obtained under the Singapore Security of Payments Act (or indeed the NSW Security of Payments Act) is “more akin to an interlocutory judgment than a final unassailable judgment” by reason of s 21(1)(b) of the Singapore Security of Payments Act;

2. the plaintiff had failed to explain its non-disclosure of the matters referred to above and, in particular, whether its failure was inadvertent or deliberate;

3. the plaintiff’s consent to the setting aside of the statutory demand amounted to a concession that it could not enforce the Judgment pending determination of the Defendant’s Arbitration; and

4. the plaintiff was required to identify a legitimate forensic purpose for which the documents were sought and to show that the documents would assist the enforcement of the judgment using the court’s processes and had failed to do so.

27. The defendant submitted further that the examination order ought be set aside in so far as it required the production of documents. It argued that the order was ambiguous because it did not indicate whether the documents to be provided were limited to the defendant’s documents; or whether the two-year period is limited to the tax returns or whether it applies to all of the listed categories of documents. Mr Allen relied on Attorney-General for New South Wales v Chidgey [2008] NSWCCA 65 in support of the submission that a party seeking documents (pursuant to a subpoena or an examination order) was obliged to identify the legitimate forensic purpose of such documents.

The respondent/ plaintiff’s submissions

28. Mr de Meyrick, who appeared on behalf of the plaintiff, informed me that the defendant’s application for a stay was heard over the course of half a day before Adams J before it was dismissed. He contended that Adams J had rejected the defendant argument for a stay in so far as it was based on the Defendant’s Arbitration. He contended that, in these circumstances, the defendant ought not be permitted to reargue the point in the context of an application to set aside the examination order. He submitted that the present application was no more than a delaying tactic by a judgment debtor which was unwilling or unable to pay a judgment debt.

29. The plaintiff also relied on the distinction between, on the one hand, a liquidator’s examination, and, on the other, an order for examination by a judgment creditor. Mr de Meyrick submitted that the sole purpose of the latter examination was to recover a judgment debt. He also relied on the limited matters required to be put before this Court in support of an order for examination and submitted that there was no indication in the UCPR or the Civil Procedure Act that any other matters were required to be disclosed to the Court.

Consideration

The status of the Judgment

30. I reject the defendant’s submission that the Judgment is somehow less of a judgment because it was entered as a result of registration of a foreign judgment, which, in turn, was based on an Adjudication Determination. First, whatever be the effect of s 21 of the Singapore Security of Payment Act as to the status of the underlying Adjudication Determination, such a submission is inconsistent with s 6 of the Foreign Judgments Act. Secondly, it fails to take account of the purpose of statutes such as the Singapore Security of Payment Act. Of the New South Wales equivalent, the Court of Appeal (McDougal J, Spigelman CJ agreeing) said, in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; 78 NSWLR 393:

“[207] The Security of Payment Act operates to alter, in a fundamental way, the incidence of the risk of insolvency during the life of a construction contract. As Keane JA said, of the not dissimilar Queensland statute, the Building and Construction Industry Payments Act 2004 (Qld), in RJ Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390 at [40], the statute “seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's … inability to repay could be expected to eventuate”. It followed, his Honour said, that the risk of inability to repay, in the event of successful action by the other party, must be regarded as one that the legislature has assigned to that other party. The same is true of the regime established by the Security of Payment Act.

[208] Further, the Security of Payment Act operates in a way that has been described as “rough and ready” or, less kindly, as “Draconian”. It imposes a mandatory regime regardless of the parties’ contract: s 34. It provides extremely abbreviated time frames for the exchange of payment claims, payment schedules, adjudication applications and adjudication responses. It provides a very limited time for adjudicators to make their decisions on what, experience shows, are often extremely complex claims involving very substantial volumes of documents (see for example my decision in Laing O'Rourke Australia Construction v H&M Engineering and Construction [2010] NSWSC 818 at [8]).

[209] The Security of Payment Act gives very valuable, and commercially important, advantages to builders and subcontractors. At each stage of the regime for enforcement of the statutory right to progress payments, the Security of Payment Act lays down clear specifications of time and other requirements to be observed. It is not difficult to understand that the availability of those rights should depend on strict observance of the statutory requirements that are involved in their creation.

[210] Further, not only are adjudication determinations capable of transmutation into judgments of a court of competent jurisdiction (s 25), they create issue estoppels (Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190).”

The plaintiff’s consent to the setting aside of the statutory demand

31. I also reject the defendant’s submission that the plaintiff’s consent to the setting aside of the statutory demand ought be taken as a concession or admission that the Judgment could not be enforced pending determination of the defendant’s claim the subject of the Defendant’s Arbitration. The plaintiff’s consent is consistent with its acceptance that it did not, at that stage, have a judgment of an Australian court. It thereafter proceeded to register the Singapore Judgment and obtain the Judgment. That it decided to endeavour to enforce the Judgment before serving a further statutory demand ought not, in my view, be regarded as a concession on its part.

The comparison between a liquidator’s examination and a judgment creditor’s examination

32. I am not persuaded that the comparison between an examination by a liquidator under the Corporations Act and an examination by a judgment creditor under s 108 of the Civil Procedure Act is necessarily helpful. The first is an investigative tool to inform a liquidator as to a range of matters, including as to potential causes of action and where assets of the company might be located, whereas the second is an adjunct to the enforcement of a judgment of the Court by a judgment creditor.

33. UCPR 38.2, in so far as it applies to a judgment of this Court, imposes only a requirement that the judgment creditor establish by affidavit that the judgment or order remains unsatisfied and whether an instalment order has been made. The “material questions” in s 108(5) of the Civil Procedure Act relate only to the means whereby the judgment debtor can satisfy the judgment. The answers to the material questions are designed to inform the judgment creditor as to what, if any, enforcement action, such as a garnishee order, can be taken; or whether, there being no real prospect that the judgment debtor can satisfy the judgment, the judgment creditor ought move to wind up or bankrupt the judgment debtor.

34. The purposes of a liquidator’s examination are much broader. Although the liquidator may conduct an examination to ascertain the assets of a company in liquidation, he or she may also wish to conduct an examination to ascertain a range of matters, including whether the company has engaged in insolvent trading; whether there are actions which may be brought against the directors; and so on.

35. However, in order to address the defendant’s arguments, it is necessary to descend into some detail regarding the statutory regime for liquidator’s examinations since the cases relied on by the defendant largely concerned such examinations.

36. The Corporations Act provides for mandatory examinations as of right (s 596A) and discretionary examinations (s 596B). Section 596B provides:

“Discretionary examination

(1) The Court may summon a person for examination about a corporation's examinable affairs if:

(a) an eligible applicant applies for the summons; and

(b) the Court is satisfied that the person:

(i) has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or

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

(2) This section has effect subject to section 596A.”

37. Section 596C provides:

“Affidavit in support of application under section 596B

(1) A person who applies under section 596B must file an affidavit that supports the application and complies with the rules.

(2) The affidavit is not available for inspection except so far as the Court orders.”

38. As the cases relied on by the defendant show, there is a risk that a liquidator may use such an examination as a rehearsal for the cross-examination of someone who might be called by the opposing party in proceedings brought by the liquidator on behalf of the company. In those circumstances there is a potential for the processes of the court to be abused. The court must be alert to ensure that this does not occur. For this reason the general obligation of a party who seeks relief, ex parte, to disclose relevant matters to the court is particularly significant when an application for an examination is made by a liquidator.

39. However, what is required to be disclosed requires careful identification. A consideration of the authorities reveals that the question depends on the facts and circumstances of each application. The court’s principal concern is that the liquidators’ examination be conducted for a proper purpose. That there are other proceedings between the applicant for the examination and those affected by an order for examination is not determinative.

Principles relevant to applications for liquidator’s examinations

40. The principles were summarised by Jacobsen J in Sutherland v Pascoe, in the matter of Matrix Group Ltd as Trustee for the Matrix Group Unit Trust (in liq) ACN 061 549 371 (No 2) [2012] FCA 1361 as follows:

“[58] There was a heavy obligation on a person applying for an examination summons to make full and frank disclosure of all matters which may impact upon the decision to summon a person for examination about a corporation’s examinable affairs. The obligation is one of frankness and candour to bring to the court’s attention all material including that which might lead the court to refuse the application: Southern Equities Corp Ltd (In Liq); Re Bond & Caboche v England (1997) 25 ACSR 394 at 422–423; In Re Idoport Pty Ltd (in liq) [2011] NSWSC 322 at [147].

[59] The question is whether the matters that were not disclosed were material to the decision of the Registrar to issue the summonses. It is not for the court to decide whether the summonses would nevertheless have issued if the matters had been disclosed: Idoport at [151].”

41. A related principle is that the examination must be for a proper purpose. The purposes that are proper are to be gleaned from the Corporations Act. The following “proper purposes” of such examinations were identified by Wainter Pty Ltd, in the matter of New Tel Limited (in liq) ACN 009 068 955 [2005] FCAFC 114; 145 FCR 76 at [252] per Ryan J (Lander and Crennan JJ agreeing):

“. . .

3.1 First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.

3.2 Secondly, it assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible. It also allows the corporation’s liabilities to be identified.

3.3 Thirdly, the purpose is to protect the interests of the corporation’s creditors.

3.4 Fourthly, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation.

3.5 Fifthly, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.”

42. The following principles were said to follow:

“4. If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside.

5. The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside.

6. The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the court to summon a person for examination whilst litigation is pending against that person or entities connected with that person.

7. The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant’s purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose.

8. It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors.

9. A creditor may, if first authorised by ASIC, apply to the court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole.

10. A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration.”

43. I propose to address the principal authorities on which the defendant relied.

Hong Kong Bank of Australia v Murphy

44. In Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512, trustees, who were appointed to replace a trustee that had gone into liquidation, applied to the Registrar for orders for examination of witnesses and production of documents from Hong Kong Bank of Australia and others. The Registrar granted the orders ex parte. The persons affected by the orders (the appellants) applied to McLelland J to set aside the orders on the ground that they were obtained for an impermissible purpose: namely, pre-trial interrogation and discovery for the benefit of other litigation (Victorian proceedings) and material non-disclosure (of the fact that, although they had expressed a wish to be heard at the application for examinations, they had not been notified by the trustees prior to the application). Justice McLelland was not satisfied that the purpose for which the trustees were intending to conduct the examinations was other than to obtain information which may assist them in prosecuting causes of action in the Victorian proceedings; to determine whether any of those causes of action should be abandoned; and to determine if any other causes of action should be added. His Honour did not consider that the trustees were obliged to inform the appellants of the application since they had no right to be heard at such an application.

45. An application for leave to appeal against McLelland J’s decision was granted but the appeal was dismissed. An application for special leave to appeal to the High Court was refused. In the Court of Appeal, Gleeson CJ, after addressing the authorities germane to the potential for abuse of process, said at 519:

“It is to be noted, however, as is implicit in the judgment of Street J, that there is no strict dichotomy between an advantage to be gained by an applicant for an examination order, such as a liquidator, in the capacity of a litigant, and a benefit that might flow to creditors, or contributories, or members of the public, from the conduct of an examination. Whilst the court will not permit a liquidator, or other eligible person, to abuse its process by using an examination solely for the purpose of obtaining a forensic advantage not available from ordinary pre-trial procedures, such as discovery or inspection, on the other hand, the possibility that a forensic advantage will be gained does not mean that the making of an order will not advance a purpose intended to be secured by the legislation.”

46. As to the allegation of inadequate disclosure, Gleeson CJ said, at 520:

“I can see no error in the approach taken by McLelland J. There was no suppression of any fact relevant to the propriety of making the examination orders, and the arguments which Hong Kong Bank and Mercantile Mutual wished to advance in opposition to the orders are the same as the arguments that were unsuccessfully advanced before McLelland J, and this Court.”

Re Mendarma Pty Ltd (in liquidation)

47. The defendant relied principally on Re Mendarma Pty Ltd (in liquidation) in which a liquidator sought to examine Mr and Mrs King about the affairs of Mendarma Pty Ltd (Mendarma). Mr and Mrs King were directors of Denham Properties Pty Ltd (Denham). Mr Peters was the sole director of Mendarma. On 12 May 2004 Denham had lent money to Mendarma which was guaranteed by Mr Peters and secured by an all-moneys mortgage over certain named horses owned by Mendarma, and their future progeny.

48. On 11 October 2005 Mr and Mrs King commenced proceedings against Mr and Mrs Peters for a declaration that they had dissolved a racing syndicate partnership between themselves and Mr and Mrs Peters (the Proceedings). On the same day Denham notified Mendarma requiring it to remedy its default under the mortgage by repaying the principal and interest. On 26 October 2005 Denham appointed receivers and managers of the horses secured by the mortgage.

49. On 3 November 2005 Mr Peters appointed administrators of Mendarma. On 9 November 2005, Mr and Mrs Peters filed a cross-claim in the Proceedings for a declaration that they, not Mendarma, owned the horses.

50. On 4 August 2006 the liquidators of Mendarma applied for an examination of Mr Peters. They also applied for an examination of Mr and Mrs King. The latter application was supported by an affidavit of Mr McDonald, one of the liquidators, pursuant to s 596C(2) of the Corporations Act. Mr McDonald referred to his earlier affidavit to examine Mr Peters. Mr McDonald annexed Denham’s proof of debt and set out the loan agreement and the fixed charge. He expressed his opinion that the charge may amount to an uncommercial or insolvent transaction. He made no reference to the Proceedings or to the fact that claims had been made by Mrs Peters on behalf of Mendarma against Mr and Mrs King and Denham.

51. Mr and Mrs King objected to the examination and contended that they were not involved in the affairs of Mendarma and did not know anything about the affairs of Mendarma which would not already be known to the liquidators. They contended that there had been a material non-disclosure and that there was a risk that the examination would be used for an improper purpose. Justice White set aside the order for examination on the basis that there was a risk that the transcript of the examination could be used in the Proceedings to give Mrs Peters a forensic advantage, which would not be obtainable in the Proceedings per se. His Honour also considered there to have been a material non-disclosure to the Registrar when the application was made for an order that Mrs Peters be examined, since the Proceedings were not disclosed. Justice White set aside on the grounds of material non-disclosure. However, his Honour indicated that the discharge of the summons was no bar to a further application based on an affidavit which made full disclosure of all material matters.

Conclusions regarding order for examination

52. I do not accept Mr Allen’s submission that these cases are analogous to the present case of an examination by a judgment creditor of a judgment debtor. Unlike a liquidator’s examination, which may have several different purposes, an examination such as the one ordered in the present case by the Registrar had a relatively straightforward purpose: to identify the means, if any, whereby the defendant could pay the Judgment. The differences between these two types of examinations are plain from the context in which they arise; the applicable legislation; and the rules of court that govern them.

53. However, even if the cases that concern liquidators’ examinations are, contrary to my view, analogous, I do not consider there to have been any material non-disclosure. The plaintiff, in my view, disclosed all that was material: namely that there was a judgment that had not been the subject of an instalment order and that was still outstanding. That the defendant had a claim against the plaintiff in Singapore was, for the purposes of enforcing the Judgment, beside the point, and, accordingly, not material. In any event, I do not consider there to have been any real prospect that the Registrar, upon becoming aware of other proceedings, would have done other than order the examination summons. I regard the suggestion that the Registrar would have, in that event, required the defendant to be heard on the application for an examination summons as fanciful.

54. In my view, the plaintiff was not required to disclose the matters listed in (1)-(8) of the summary of the defendant’s submissions set out above as none was material to the Registrar’s decision whether to make the examination order. In these circumstances the plaintiff was not required to give any explanation for not disclosing the matters to the Registrar.

55. The plaintiff is entitled to enjoy the fruits of the Judgment and ought not be obliged to await the resolution of an outstanding claim by the defendant against it which has yet to be determined.

56. Further, I do not discern any basis for inferring that the purpose of the examination was other than the stated, and proper, purpose.

57. If, in the course of the examination, the plaintiff asks questions that are not germane to the purposes of the examination, objection can be taken to particular questions. But that does not make the examination other than a proper one.

The defendant’s objections to the order for production

The documents sought

58. The defendant also objected to the order in so far as it required it to produce certain documents. I regard the list of documents sought as unexceptional. Each of the categories was potentially relevant to the defendant’s means to satisfy the Judgment. For example, whether it had money in bank accounts, and the details of such accounts, would be germane to the question whether there was any utility in a garnishee order. Whether it was solvent would also be a material matter: see s 108 (5)(ii) of the Civil Procedure Act.

59. I do not regard Attorney-General for New South Wales v Chidgey as supporting the defendant’s contentions. In Attorney-General for New South Wales v Chidgey the respondent was charged with supplying ecstasy to undercover police officers. He requested that a subpoena be issued to the Commissioner requiring production of documents relating to the controlled operations. The Commissioner of Police sought to have the subpoena set aside on the basis that there was no legitimate forensic purpose in seeking access to those documents. The Magistrate refused to set aside the subpoena in the course of committal proceedings. The Court of Criminal Appeal allowed an appeal under s 5F of the Criminal Appeal Act 1912 (NSW) on the basis that the respondent was unable to articulate a legitimate forensic purpose for requiring production of, or access to, the documents. This case is distinguishable from the present: the documents listed in the examination order are plainly relevant to the purpose of the order, for the reasons given above.

Whether the order is ambiguous

60. I do not discern any ambiguity in the reference to “for the past 2 years” since I regard the phrase as limiting each and every one of the categories listed above. I consider that a fair reading of the examination order is that it seeks the judgment creditor’s documents in those categories. The examination order is, in my view, sufficiently clear. The defendant has not established any textual basis on which to set aside paragraph 2 of the examination order.

Order

61. For the foregoing reasons I make the following orders:

1. Dismiss the defendant’s notice of motion filed 24 November 2015.

2. Unless an application for a different order is made in writing to my Associate within seven days, order the defendant to pay the plaintiff’s costs of the notice of motion.

3. Grant liberty to the plaintiff to approach the Registrar to obtain, in consultation with the defendant, a date for the hearing of the examination ordered by the Registrar on 22 September 2015.

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Decision last updated: 07 December 2015