Re Geneva Finance Ltd (Receiver and Manager Appointed) - [2001] WASC 302

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RE GENEVA FINANCE LTD (Receiver and Manager Appointed); EX PARTE PETER RAYMOND QUIGLEY (The Receiver and Manager of GENEVA FINANCE LTD (Receiver and Manager Appointed)) [2001] WASC 302

CORAM: MASTER SANDERSON

HEARD: 29 AUGUST, 17 & 20 SEPTEMBER 2001

DELIVERED : 6 NOVEMBER 2001

FILE NO/S: COR 222 of 2001

MATTER :GENEVA FINANCE LTD (Receiver and Manager Appointed) (ACN 009 168 147)

EX PARTE
PETER RAYMOND QUIGLEY (The Receiver and Manager of GENEVA FINANCE LTD (Receiver and Manager Appointed))
Plaintiff

Catchwords:

Corporations Act - Application to set aside examination summonses - Turns on own facts

Legislation:

Corporations Act, s 596B

Result:

Application to set aside summons refused - Summons amended to limit scope of examinations

Category: B

Representation:

Counsel:

Plaintiff: Mr K L Christensen & Mr P G Clifford
Applicants: Mr M J Buss QC & Mr J Garas

Solicitors:

Plaintiff: Tottle Christensen
Applicants: Mallesons Stephen Jaques

Case(s) referred to in judgment(s):

Boys v Australian Securities Commission (1997) 24 ACSR 1
Boys v Australian Securities Commission (1998) 80 FCR 403
Boys v Australian Securities Commission [2001] FCA 1325
Emanuel Investments Pty Ltd (In Liq); Saint v Macks [1999] SASC 264
Gerah Imports Pty Ltd v The Duke Group (1994) 12 ACSR 513
Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301
Lamb v Fixler (1994) 12 ACLC 529
Morton v Joynson [2000] NSWSC 647
Re Bosun Pty Ltd [2000] NSWSC 647
Re Clutha Ltd (2000) 34 ACSR 685
Re Excel; Wortherley v England (1994) 52 FCR 69
Re The Duke Group Ltd (In Liq) (1994) 119 ALR 401

Case(s) also cited:

Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
Gray v Bridgestone Australia Ltd (1986) 4 ACLC 330
Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512
Minister for Education v Bailey [2000] WASCA 377
Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] 1 QB 814
Printing Telegraph & Construction Co of the Agence Havas Ltd v Drucker [1894] 2 QB 801
Re Biposo Pty Ltd; Ex parte Condon v Rodgers (1995) 13 ACLC 1268
Re Bosun Pty Ltd (In Liq); Makris v Sheahan [2000] SASC 180
Re BPTC Ltd [1994] ACSR 460
Re Equiticorp Finance Ltd; Ex parte Brock (1992) 6 ACSR 725
Re Ezishop.Net Ltd (In Liq) [2001] NSWSC 458
Re Geneva Finance Ltd; Quigley (Receiver and Manager Appointed) v Cook (1992) 7 WAR 496
Re GPI Leisure Corporation Ltd (In Liq) (1994) 12 ACLC 815
Re GPI Leisure Corporation Ltd (In Liq) (1994) 53 FCR 365
Re Interchase Corporation Ltd (In Liq) (1996) 20 ACSR 600
Re Interchase Corporation Ltd (In Liq) (1996) 68 FCR 481
Re Allen Fitzgerald Pty Ltd (In Liq) (No 2) (1989) 7 ACLC 1205
Re McKee; Ex parte Laroar Holdings v Ross (1996) 71 FCR 156
Re Rothwells (No 2) Ltd (1989) 15 ACLR 168
Re Walanda Pty Ltd (In Liq) (1983) 7 ACLR 596
Sheahan v Pitterino; Re Moage Ltd (1997) 77 FCR 81
Whelan v ASC (1994) 13 ACSR 427
Worthley v England; Re Excel Finance Corporation Ltd (1994) 12 ACLC 775
Worthley v England; Re Excel Finance Corporation Ltd (1994) 14 ACSR 407

MASTER SANDERSON: On 19 July 2001 the plaintiff obtained orders against six individuals, who I will refer to as the proposed examinees, that summonses be issued pursuant to s 596B of the Corporations Act. The application was supported by an affidavit of the plaintiff sworn 28 June 2001. As is anticipated by the section, the orders were made ex parte. The summonses were duly issued and served and each of the proposed examinees has applied to set aside the summonses. Alternatively, the proposed examinees have applied to reduce the scope of the summonses issued against them. It is convenient at this point to quote par 2 of each of the summonses to illustrate the extent of the documentation the proposed examinees are required to produce on the return of the summonses:
"2.1all professional indemnity insurance policies, and any endorsement to those policies, current at the time that you notified any insurer or broker of a claim, arising in respect of a claim in the Supreme Court of Western Australia in action number CIV 1765 of 1993 ('the Action);
2.2all correspondence between you and your professional insurer or broker, since 26 July 1990, in any way relating to the Action;
2.3all documents relating to each and every asset including land, house, contents, motor vehicles, shares or other property in your possession custody or power, or which you own or owned or have or have had an interest since 26 July 1990 ('the Assets');
2.4valuations or appraisals, and correspondence or notes of communications with valuers, appraisers, art or antique dealers, since 26 July 1990, in any way relating to the Assets;
2.5any agreements, correspondence and/or notes of any communication to any bank, financier or other lender since 26 July 1990, evidencing any pledging, charging, granting of any form of security over any of the Assets or evidence of the terms upon which you have granted any personal guarantee or indemnity to any third person or entity;
2.6each and every income tax return prepared and/or lodged by you or on your behalf since 26 July 1990;
2.7each and every statement of financial position prepared by you or on your behalf since 26 July 1990;
2.8each and every document evidencing the nature and extent of the legal or beneficial interest held by you in each and every company or trust which you have or have had any legal or beneficial interest since 26 July 1990;
2.9each and every bank statement recording the balance of any account maintained by you and/or any company or trust as referred to in paragraph 2.8 since 26 July 1990."
As an adjunct to this application the proposed examinees first sought an order that they have access to the affidavit of the plaintiff filed in support of the application. After hearing argument on all aspects of the application I indicated that if I determined that the proposed examinees should have access to that affidavit, they would be advised accordingly and after they had read the affidavit, they could make further written submissions. This is what in fact transpired. I have taken into account these further written submissions in determining this application. However, before dealing with the substantive part of the application I should give brief reasons why I concluded the proposed examinees should have access to the plaintiff's affidavit. That requires some brief background facts.
The proposed examinees were in the late 1980s the auditors of Geneva Finance Ltd ("Geneva"). Geneva was a finance company that borrowed funds from the public on security of debentures. Perpetual Trustees WA Ltd ("Perpetual") was the trustee for the debenture holders. Perpetual appointed the plaintiff as receiver and manager of Geneva pursuant to the powers contained in the debenture trustee. In July 1993 the plaintiff issued proceedings against them in this Court alleging various matters and seeking damages. Prior to the issue of these proceedings the plaintiff had examined the proposed examinees under an arrangement with the Australian Securities Commission ("ASC"). The circumstances of these examinations and the use made of the transcripts of the examinations was the subject of proceedings in the Federal Court. See Boys v Australian Securities Commission (1997) 24 ACSR 1 (and on appeal Boys v Australian Securities Commission (1998) 80 FCR 403). In the course of his judgment Carr J (at first instance) gave a detailed summary of the circumstances which led to the issue of proceedings in this Court. I would adopt his Honour's recitation of events without repeating what he had to say.
The circumstances in which an affidavit in support of an application for the issue of examination summonses ought be released to parties seeking to set aside the summons were considered by the Full Court of the Federal Court in Re Excel; Wortherley v England (1994) 52 FCR 69. The Court (Gummow, Hill and Cooper JJ) said (at 94):
"An applicant will not be permitted access to such material to enable him or her to 'fish' for a case. There must be material before the Court from which it appears that the applicant has an arguable case, to which the material is relevant, before the discretion should be exercised in favour of the applicant. But once that appears the discretion will normally be exercised in favour of the application."
In this case the proposed examinees have all been examined before by the plaintiff. It is not unreasonable for them to ask why they should be examined again. Further, they have raised concerns in the past about a conflict of interest between the plaintiff in his role as a receiver and his position as a consultant to the ASC. In these circumstances I was satisfied that the proposed examinees were not merely "fishing". It is true that the proposed examinees were not, prior to reading the affidavit, able to attack the grounds upon which the plaintiff made the application. That is to be expected. Nonetheless I was satisfied that the proposed examinees had bona fide concerns about the issue of the examination summonses. Any doubts on that question that I might have had were swept away by the way in which the argument was put by counsel for the proposed examinees at the hearing. In the circumstances I was satisfied that the proposed examinees should see the plaintiff's affidavit so they could mount their argument fully and completely.
The essence of the proposed examinees' argument can be summarised in this way. They point to the fact that the plaintiff is the receiver/manager of Geneva appointed by Perpetual. As such, he is appointed out of court and is not subject to the same controls as a liquidator. It is submitted that it is therefore not appropriate for the plaintiff to have the advantage of cross‑examining the proposed examinees. This submission was put on a number of bases. First, it was said, that there was a risk that the plaintiff as agent of Perpetual would act in a way that was to the advantage of the debenture holders and not the creditors of Geneva overall. Secondly, it was said that to allow the summonses to stand would confer upon the plaintiff a forensic benefit which was, in all the circumstances, inappropriate. A number of other submissions were made but I think it is fair to say that all were variations on these two themes.
For the plaintiff it was said that the Boys decision in the Federal Court had made it plain that there was no actual conflict of interest between the plaintiff's position as a receiver and manager and his position as a consultant to the ASC. Once the plaintiff was authorised by the ASC to conduct the examination and became an "eligible applicant", then short of a finding that the examinations were an abuse of process, there was no basis for setting the summonses aside. It was also submitted on behalf of the plaintiff that as the Federal Court had concluded that there was no conflict of interest between the plaintiff holding the position as the receiver manager by Perpetual and acting as a consultant to the ASC, there was in reality no question of a conflict of interest arising in relation to these examination summonses. In answer to that submission, it was said on behalf of the proposed examinees that any consideration of a conflict of interest arising in connection with the appointment of the plaintiff as a consultant to the ASC was a different question to the question of whether a conflict of interest arises in connection with the examination summonses.
As a starting point it is clear that when summonses are issued there is a two‑stage process - the first stage is the appointment of a person in the plaintiff's position as an "eligible applicant" within the meaning of s 596B and the second is the question whether, in all the circumstances, the examination summonses ought issue. This was considered by the Federal Court in the Wortherley decision. The Court referred to authorisation given under the provisions of the Corporations Law and then continued (at 82):
"Once an authorisation has been made, to which s 597(1) refers, the second stage of the procedure is an application by the authorised person (referred to in s 597(2) as a prescribed person) to the Court for an order for examination under s 597(3). The result of the application to the Court is a decision whether or not to order an intended examinee to attend to be examined. Different matters will arise for consideration at each stage of this two stage process. The question at issue in the first stage would be whether the prospective application seeking authorisation is an appropriate person for the Commission to authorise to make the application to the Court. That question will require consideration of the relationship which that person has to the corporation in relation to which application to the Court will be made, although it may also encompass matters personal to it that applicant, such as the applicant's relationship to the persons to be examined. The Court, in deciding whether to grant the examination order, may take into account different matters, specifically matters concerning the relationship between the examinee and the corporation as well, in an appropriate case, as the relationship between the applicant for the examination order and proposed examinee and the purpose of the applicant in seeking the examination order."
(The references are to the sections as they were prior to amendment which became effective 23 June 1993).
It follows from the above that the ASC has determined that the plaintiff was the appropriate person for the ASC to authorise to make the application to the Court. That decision of the ASC was challenged in Boys. The basis upon which it was challenged was, inter alia, that there was a conflict of interest between the plaintiff's position as receiver and his position as a consultant to the ASC. Carr J dealt with this issue in some detail in his judgment (at 22 ‑ 27). His Honour concluded that there was no conflict of interest. In my view that finding determines the question of whether or not there is a conflict of interest for all purposes. I accept that other different matters may be taken into account in determining whether to set aside the summonses. But in my view, it is not open to the proposed examinees to contend they should be set aside on the basis of a conflict of interest. Of course the position might be different were additional evidence adduced which showed that between the date of the authorisation and the date of the application for issue of the summonses, something had occurred which might give rise to a conflict. That is not suggested in this case.
Having reached that conclusion much of the ground upon which the proposed examinees based their case falls away.
There is, I think, no doubt that the provisions of s 596B allow for an examination summons to be issued in the terms of the summonses issued in this case. In Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 the Full Federal Court put the position in this way (at 311):
"… the ambit of the power is sufficiently wide to enable information to be sought from a defendant or potential defendant as to the ability of that person to satisfy any reasonable judgment which may be obtained in litigation instigated by the liquidator. In that context it is within power to order production of relevant documents, including insurance policies, to ascertain whether or not the person has an enforceable right to indemnity from an insurer or the other person. The obtaining of such information by the liquidator in the course of winding up is to facilitate the realisation of the chose in action to the best advantage of the company and its creditors …"
Counsel for the proposed examinees relied upon the reference in Grosvenor Hill to a liquidator to submit that the plaintiff as a receiver appointed out of court rather than a liquidator appointed by the court should not be invested with powers that might properly be conferred upon a liquidator. Having concluded that the plaintiff's position is not infected by any conflict of interest and his having been authorised to make an application by the ASC, I can see no basis upon which the distinction can be drawn. It seems to me that the plaintiff was entitled to seek the summonses and there is no basis upon which they should be set aside.
It must be acknowledged that it is not always easy to reconcile all the decisions in this area. For instance, in Emanuel Investments Pty Ltd (In Liq); Saint v Macks [1999] SASC 264, Burley J set aside examination summonses directed at ascertaining what professional indemnity insurance was held by defendants in proceedings brought by the liquidator on the basis that the liquidator had obtained funding for his action and had decided to proceed prior to obtaining orders for the examination summonses. His Honour concluded that the fact that the litigation would continue no matter what insurance might be held by the defendants and the "considerations of privacy and confidentiality" outweighed whatever might otherwise have been a legitimate purpose of the summonses. Perhaps all that can be said is that each case is dependent upon its own facts and the decision whether or not to set aside the summonses is a matter for discretion. That being the case, the reference to outcomes in particular cases may be of little assistance.
There are two other matters which require attention. The first relates to certain documents which for ease of reference were referred to throughout these proceedings as "the Perpetual documents". It is unnecessary for me to detail the history of these documents. It is sufficient if I say that they were subject of implied undertakings given to the Federal Court. The proposed examinees applied for release of these implied undertakings. The matter was considered by Justice R D Nicholson of the Federal Court, who modified the undertakings and published his reasons for doing so: see Boys v Australian Securities Commission [2001] FCA 1325. The documents are to be found at annexure "JG2" of an affidavit of Joseph Garas sworn 14 September 2001. It was the proposed examinees' submission that I should consider these documents as part of the overall consideration as to whether or not the summonses ought be set aside. On behalf of the plaintiff it was submitted that as these documents form the basis upon which Carr J concluded in the Federal Court proceedings that the plaintiff was not in a position where he had a conflict of interest, the documents were irrelevant and ought not be considered. An alternative formulation of the plaintiff's position was to the effect that Carr J having concluded that there was no conflict of interest, an estoppel arose and therefore no purpose was to be served in looking at the documents.
I have determined that there is no basis upon which I could find the plaintiff was in a conflict of interest position so as to affect this application. That is an issue that has been determined by Carr J. He determined that question both on the basis of the documents available to him, including the Perpetual documents, and after hearing evidence in extensive argument. There is then no point to be served in my further considering these documents. On that basis I have determined that it is not appropriate for me to refer to the documents and I have not done so.
The final question relates to the width of the examination summonses - particularly the extensive documentation the examinees are required to produce going back up to 10 years. The proposed examinees say that the summonses are too wide. I agree. In my view the extent of the material sought is oppressive and for that reason, in exercise of my discretion, I think that the summons should be limited to par 2.1 and par 2.2, with par 2.2 amended to refer to 1 January 2001 rather than 26 July 1990.

In support of the terms of the examination summonses counsel for the plaintiff referred to a number of cases where summonses in terms not dissimilar to the present were thought appropriate: See Morton v Joynson [2000] NSWSC 647; Re Bosun Pty Ltd [2000] NSWSC 647; Lamb v Fixler (1994) 12 ACLC 529; Re Clutha Ltd (2000) 34 ACSR 685; Re The Duke Group Ltd (In Liq) (1994) 119 ALR 401; Gerah Imports Pty Ltd v The Duke Group (1994) 12 ACSR 513. It is true that in each of these cases the terms of the examination summonses were wide, although perhaps not quite as wide as the summonses in this case. However, each of the cases turned on its own facts. For instance, in Morton v Joynson the Court was satisfied, based upon the affidavit filed in support of the application for the issue of the summonses that the liquidator had grounds for believing that the proposed examinees were organising their affairs in such a way as to defeat any judgment which might be entered against them (see page 86). What the affidavit filed in support of the application in this case makes plain is that after the collapse of HIH Insurance Ltd the plaintiff is concerned about what professional indemnity insurance cover may be available to the proposed examinees should there be an adverse finding against them. Given that fact I think that it is proper to limit the examination summonses as I have indicated.
I will hear the parties as to the precise form of order and as to costs.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RE GENEVA FINANCE LTD (Receiver and Manager Appointed); EX PARTE PETER RAYMOND QUIGLEY (The Receiver and Manager of GENEVA FINANCE LTD (Receiver and Manager Appointed)) [2001] WASC 302 (S)