Re Ipo Wealth Holdings No 2 Pty Ltd (in prov liq)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2020 02990

IN THE MATTER of IPO WEALTH HOLDINGS NO 2 PTY LTD (ACN 620 610 157)
(In Provisional Liquidation) & Ors (according to the attached Schedule)

NICHOLAS GIASOUMI AND HAMISH ALAN MACKINNON IN THEIR CAPACITY AS PROVISIONAL LIQUIDATORS OF IPO WEALTH HOLDINGS NO 2 PTY LTD (ACN 620 610 157) (IN PROVISIONAL LIQUIDATION) & Ors
(according to the attached Schedule)

Plaintiffs

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JUDGE:	Matthews AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	25 November 2021
DATE OF RULING:	13 December 2021
CASE MAY BE CITED AS:	Re IPO Wealth Holdings No 2 Pty Ltd (in prov liq) & Ors
MEDIUM NEUTRAL CITATION:	[2021] VSC 821

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CORPORATIONS – Examination by liquidators - Resumption of adjourned examination not oppressive or an abuse of process – Examinee access to confidential affidavits of liquidator refused – Re Dalstonville Pty Ltd (in Liq) and Don Leunig Pty Ltd (in Liq) (2018) 133 ACSR 473 – Re New Tel Ltd (in liq): Evans v Wainter Pty Ltd [2005] FCAFC 114 - Sent v Andrews (2002) 6 VR 317 - ASIC v Karl Suleman Enterprises; Application of Stoliar (2003) 44 ACSR 694.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M J Galvin QC, with Ms N L Papaleo	Thomson Geer
For the Applicant, James Peter Mawhinney	Mr M G R Gronow QC, with Mr A Alexsov and Mr H Hill-Smith	Roberts Gray Lawyers

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 3

Material relied upon..................................................................................................................... 3
Relief sought on the Application................................................................................................ 4
The IPO Wealth Group................................................................................................................. 4
Mr Mawhinney’s examination to date....................................................................................... 6

Access Application............................................................................................................................. 6

Examinee’s submissions............................................................................................................... 6
Plaintiffs’ submissions.................................................................................................................. 8
Consideration................................................................................................................................ 9

Evidence............................................................................................................................................. 11

Other proceedings involving the IPO Wealth Group............................................................ 11
Accloud Shares Proceeding.............................................................................................. 11
Convertible Note Proceeding........................................................................................... 12
The BVI Proceeding........................................................................................................... 14

Purpose/intention for the resumed examination of Mr Mawhinney................................. 16
Previous examinations of Mr Mawhinney.............................................................................. 17

Applicable principles concerning the Application................................................................... 19

Extension of time......................................................................................................................... 19
General principles....................................................................................................................... 20

Submissions regarding the Application...................................................................................... 21

Examinee’s submissions............................................................................................................. 21
Extraordinary nature of examinations........................................................................... 22
Mr Mawhinney has already been subjected to seven days of examination and further examination is oppressive.................................................................................... 23
The Plaintiffs already have extensive knowledge........................................................ 25
The resumed examination concerns matters which are the subject of other proceedings.................................................................................................................................. 27
Abuse of process................................................................................................................ 30

Plaintiffs’ submissions................................................................................................................ 33
Alleged delay..................................................................................................................... 33
Purpose of the resumed examination............................................................................. 34
The application to discharge the examination summons should be dismissed....... 36

Examinee’s reply submissions.................................................................................................. 40
Stay of examination pending an appeal......................................................................... 40
Alleged delay..................................................................................................................... 41

Consideration.................................................................................................................................... 42

Alleged delay............................................................................................................................... 42
Onus of establishing an abuse of process................................................................................ 43
Length of Mr Mawhinney’s examination and whether further examination is oppressive or excessive.............................................................................................................................. 45
Whether the Plaintiffs already have enough information such that further examination is not necessary............................................................................................................................. 47
Whether the resumed examination concerns matters which are the subject of other proceedings, such that it should not be allowed.................................................................................. 51
Whether the Plaintiffs’ predominant purpose in resuming the examination is to obtain a forensic advantage or another impermissible purpose.............................................................. 53

Conclusion......................................................................................................................................... 54

HER HONOUR:

Introduction

The Plaintiffs were appointed as receivers and managers to IPO Wealth Holdings Pty Ltd (‘IPO Wealth Holdings’) and 16 special purpose vehicles (‘SPVs’, together with IPO Wealth Holdings, the ‘IPO Wealth Group’) owned by IPO Wealth Holdings on 22 May 2020. On 2 July 2020, Robson J of this Court made orders appointing the Plaintiffs as provisional liquidators of IPO Wealth Group. These entities were subsequently wound up by this Court on 17 September 2020 and the Plaintiffs were appointed as liquidators.

On 21 July 2020, I granted the Plaintiffs’ application for a summons for examination addressed to James Peter Mawhinney (‘Examinee’) to be issued pursuant to s 596A of the Corporations Act 2001 (Cth) (‘Act’). The Plaintiffs’ application was supported by the confidential affidavit of Hamish Alan MacKinnon, one of the Plaintiffs, sworn 17 July 2020 (‘First Confidential Affidavit’). Mr Mawhinney was the sole director of each of the companies in the IPO Wealth Group. The summons for examination dated 21 July 2020 (‘Summons’) required the Examinee to produce certain documents to the Court by 5 August 2020 and to attend a virtual hearing for the purpose of being examined by the Plaintiffs.

The examination of Mr Mawhinney took place on 17, 19 and 20 August 2020. At the conclusion of the hearing on 20 August 2020, I made orders, inter alia, adjourning the examination and giving the Plaintiffs liberty to apply within six months for the resumption of the examination. The Plaintiffs exercised that liberty to apply and Mr Mawhinney was examined on 25 February 2021, which was to continue on 1 March 2021, however Mr Mawhinney did not attend Court on the latter date as he was ill. I made orders adjourning the examination to 22 March 2021, and Mr Mawhinney was examined on that date and on 23 March 2021. On 23 March 2021 I made orders, inter alia, adjourning the examination and giving the Plaintiffs liberty to apply within six months for the resumption of the examination. The Plaintiffs again exercised that liberty to apply and Mr Mawhinney was examined on 29 April 2021. On 3 May 2021, I made orders, inter alia, adjourning the examination and giving the Plaintiffs liberty to apply within three months for the resumption of the examination.

On 29 July 2021, the Plaintiffs applied for the resumption of Mr Mawhinney’s examination and subsequently filed a second confidential affidavit of Mr MacKinnon, sworn 5 August 2021, in support (‘Second Confidential Affidavit’). On 6 August 2021, I made orders for the resumption of Mr Mawhinney’s examination and for it to occur on 25 October 2021 (‘Resumption Order’).

On 18 October 2021, Mr Mawhinney filed an interlocutory process seeking, amongst other things, that the Summons be set aside, the Resumption Order be discharged, and any further examination of Mr Mawhinney be stayed as an abuse of process (‘Application’). In addition, Mr Mawhinney sought orders that he be granted access (‘Access Application’) to the First Confidential Affidavit and the Second Confidential Affidavit (together, the ‘Confidential Affidavits’). The interlocutory process was listed for hearing on 25 October 2021.

The hearing listed for 25 October 2021 was adjourned on the Court’s own motion to 28 October 2021 for directions. On that date, I made directions for the filing of affidavits and submissions in respect of the Access Application, which was then to be determined on the papers after 5 November 2021. I also made directions for the filing of affidavits and submissions in respect of the Application generally, and listed it for hearing on 25 November 2021.

On 8 November 2021, I made an order refusing the Access Application and stated, in ‘other matters’, that I would give reasons for that decision with my reasons on the Application after the latter had been heard and determined (‘Access Refusal Order’). Accordingly, these reasons include my reasons for refusing the Access Application.

For the reasons which follow, the Application will be dismissed.

Background
Material relied upon

In support of the Application, including the Access Application, Mr Mawhinney relies on the following:

(a) affidavit of Rhys Roberts sworn 18 October 2021 (‘First Roberts Affidavit’). Mr Roberts is the managing director and senior partner of Roberts Gray Lawyers (‘RGL’), solicitors for Mr Mawhinney;

(b) affidavit of Mr Roberts sworn 5 November 2021 (‘Second Roberts Affidavit’);

(c) outline of submissions filed 18 October 2021 (‘Examinee’s First Written Submissions’);

(d) written submissions filed 5 November 2021 on the Access Application (‘Examinee’s Second Written Submissions’);

(e) further submissions filed 10 November 2021 (‘Examinee’s Third Written Submissions’); and

(f) submissions in reply filed 22 November 2021 (‘Examinee’s Written Reply Submissions’).

In opposition to the Application, including the Access Application, the Plaintiffs rely on the following:

(a) affidavit of Mr MacKinnon sworn 22 October 2021 (‘Current MacKinnon Affidavit’);

(b) affidavit of Mr MacKinnon sworn 18 November 2021 (‘Further MacKinnon Affidavit’);

(c) written submissions filed 3 November 2021 on the Access Application (‘Plaintiffs’ First Written Submissions’); and

(d) written submissions filed 18 November 2021 (‘Plaintiffs’ Second Written Submissions’).

Relief sought on the Application

In the interlocutory process, apart from the Access Application, Mr Mawhinney seeks the relief summarised below:

(a) to the extent necessary, an extension of time to apply for the Summons to be set aside, pursuant to r 1.10 of the Supreme Court (Corporations) Rules 2013 (‘Corporations Rules’) and r 3.02 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’);

(b) orders discharging the Summons under r 11.05 of the Corporations Rules, or staying the examination under r 23.01(1)(b) of the Rules, on the ground that there is no longer any legitimate purpose for the examination or that his continued examination would be an abuse of process;

(c) orders under r 11.5 of the Corporations Rules dismissing the Resumption Order;

(d) in the event that these applications are unsuccessful, an adjournment or stay of the examination, to permit him to appeal in relation to these matters.

The IPO Wealth Group

In order to properly understand the parties’ submissions, it is necessary to set out (as briefly as possible) some of the background regarding the IPO Wealth Group.

As noted above, IPO Wealth Holdings is the sole shareholder of the 16 SPVs, which together make up what is known as the IPO Wealth Group. The IPO Wealth Group also formed part of a broader group, with a number of other companies controlled by Mr Mawhinney known as the Mayfair 101 group.[1]
[1]Current MacKinnon Affidavit, [4].

The investigations conducted by the Plaintiffs have, according to Mr MacKinnon, disclosed that the IPO Wealth Group operated an unregistered managed investment scheme. For that purpose, a fund known as the IPO Wealth Fund (‘Fund’) was established, constituted by a unit trust, on or about 17 March 2017. Vasco Trustees Ltd (‘Vasco’), which holds an Australian financial services licence and provides trustee, responsible entity and administration services to Australian and international investment managers, was engaged as trustee of the Fund. Members of the public acquired units in the Fund in the expectation of targeted financial returns. Vasco lent the money invested in the Fund to IPO Wealth Holdings pursuant to a facility agreement (‘Vasco Facility Agreement’). IPO Wealth Holdings provided to Vasco a general security agreement by way of security for the funds advanced to it pursuant to the Vasco Facility Agreement.[2]
[2]Current MacKinnon Affidavit, [6].

Mr MacKinnon deposes that returns to investors in the Fund were dependent upon the ability of IPO Wealth Holdings to make principal and interest payments of 10% per annum to Vasco pursuant to the Vasco Facility Agreement, and that the ability of IPO Wealth Holdings to make those payments was in turn dependent on returns to it from its own investments and/or the investments of the SPVs, either by way of income or realisation of the investments.[3]
[3]Current MacKinnon Affidavit, [7].

At the time the Plaintiffs were appointed as receivers and managers of the IPO Wealth Group, in excess of $79 million was owing by IPO Wealth to Vasco.[4]
[4]Current MacKinnon Affidavit, [6].

Mr MacKinnon deposes that prior to the Plaintiffs’ appointment as receivers and managers of the IPO Wealth Group, IPO Wealth Holdings and some of the SPVs had entered into transactions involving the transfer of assets owned by them to entities associated with Mr Mawhinney which are registered in Australia, the British Virgin Islands and the United Kingdom. So far, the Plaintiffs have investigated significant transfers of funds totalling over $30 million between the IPO Wealth Group and other entities controlled by Mr Mawhinney. One of those entities is 101 Investments Limited (‘101 Investments’), a foreign company which was incorporated in the British Virgin Islands on 29 January 2019. Mr MacKinnon says that he believes, based on evidence given by Mr Mawhinney in his public examination, that it is ultimately owned and controlled by Mr Mawhinney.[5]
[5]Current MacKinnon Affidavit, [11].

The Plaintiffs’ investigations have revealed that the IPO Wealth Group had made either debt or equity investments in various entities in Australia, the United Kingdom, Italy, India, the United States of America, Malaysia and Israel. Mr MacKinnon says that most of these were start-up entities and, therefore, investments in them had no readily ascertainable or realisable value.[6] The Plaintiffs have undertaken investigations into these investments, including by conducting public examinations, with a view to realising them for the benefit of creditors.[7]
[6]Current MacKinnon Affidavit, [9].
[7]Current MacKinnon Affidavit, [10].

Mr Mawhinney’s examination to date

Mr Mawhinney has been examined by the Plaintiffs in this Court on seven previous occasions: 17, 19 and 20 August 2020; 25 February 2021; 22 and 23 March 2021; and 29 April 2021.[8] Except for the last of these, the examinations generally lasted the full day.
[8]First Roberts Affidavit, [10].

Access Application

As noted above, the Access Application was determined on the papers by me on 8 November 2021 and was refused on that date. I now set out the submissions made by the parties and my reasons for refusing the application.

Examinee’s submissions

The Examinee submitted that he had an arguable case in respect of the Application generally and should therefore be given access to the Confidential Affidavits as ‘[o]rdinarily, if the person establishes an arguable case, it can be accepted that there are persuasive grounds for permitting the person or his or her legal representatives to have access to the affidavit’.[9]
[9]Bazzo -v- Robert Michael Kirman and William James Harris as Joint and Several Liquidators of Whitby Land Company Pty Ltd (In Liquidation) ACN 115 233 193 [2021] WASCA 170, [85].

In determining whether access to the Confidential Affidavits should be granted, the Court ‘must first determine whether such a case is established on the material before the Court other than the supporting affidavit’.[10] The second step, if an arguable case is established, requires the Court to ‘then inspect the supporting affidavit itself and form a view as to whether or not it is in the interests of justice to permit the applicant to access the affidavit’.[11] The Examinee submits that in the present case access is required because ‘it is of critical importance for [the examinee] to be informed about the specific matter which the liquidator intends to investigate by the examination process’ as ‘[w]ithout knowing and being able to assess that information, the [examinee] cannot present a plausible case of abuse of process’.[12] The present situation is said to be one where access to the Confidential Affidavits is so critical that ‘the Court would not be able to fairly and properly determine the examinee’s application in its absence’.[13] Delay in bringing this application is said not to be a factor relevant to the interests of justice, especially given the Court’s guidance to Mr Mawhinney regarding timing on 29 April 2021.[14]
[10]Secatore, in the matter of Last Lap Pty Ltd (in liq) [2020] FCA 627, [75] (emphasis in original).
[11]Ibid, [75].
[12]Re Leisure Developments (Queensland) Pty Ltd (in liq) (2002) 41 ACSR 276, [42].
[13]Re Dalstonville Pty Ltd (in Liq) and Don Leunig Pty Ltd (in Liq) (2018) 133 ACSR 473, [15] (‘Re Dalstonville’).
[14]Examination of Mr Mawhinney, 29 April 2021, T322, lines 19-26.

The overlap between the proposed examination topics and the BVI Proceeding, as defined at [44] in these reasons, is said to mean that access to the Confidential Affidavits is the only means by which the nature of the overlap, and any improper advantage or lack of disclosure, can be determined.

The statement in the Plaintiffs’ First Written Submissions that the Confidential Affidavits are not ‘relevant’ to the continued examination as now planned and ‘the liquidation has developed considerably since then’[15] is said to be concerning. The Examinee submits that the Current MacKinnon Affidavit is scant on detail in relation to the topics for examination. It is then said that the Court may be in the position where there is insufficient evidentiary material from the Plaintiffs to justify further examination or to enable proper scrutiny of their purpose in seeking further examination.
[15]Plaintiffs’ First Written Submissions, [11].

In the alternative, the Examinee submits that if by that statement the Plaintiffs mean to say that the contents of the Confidential Affidavits are no longer relevant to the continuation of the examination – then there is no reason for preventing Mr Mawhinney and his advisers from seeing them. It is submitted that the Current MacKinnon Affidavit does not on its own provide sufficient facts to justify further examination.

Plaintiffs’ submissions

The Plaintiffs submit that pursuant to s 596C(2) of the Act, an affidavit filed in support of an application for an examination summons is not available for inspection except so far as the Court orders, such that the starting position is that the First Confidential Affidavit is confidential. As orders were made by the Court permitting the Second Confidential Affidavit to be filed on a confidential basis, it too is confidential. The onus is on the Examinee to establish an arguable case for setting aside the Summons and/or discharging the Resumption Order and that access to the Confidential Affidavits would be likely to assist in determining the correctness of that challenge.

The Plaintiffs rely on the following passage from Re Dalstonville, where Judicial Registrar Hetyey (as his Honour then was) stated the following regarding the principles relevant to the exercise of the Court’s discretion to grant an examinee access to confidential affidavits:

… The discretion to grant access to the affidavit may be exercised in favour of an examinee once a ground of challenge to the public examination process is identified as an arguable one, where the affidavit appears relevant to making out that ground and “where the justice of the case so requires”. In other words, inspection may be allowed under s 596C(2) if the Court is of the opinion that access to the affidavit is likely to assist in determining the correctness of the challenge such that the Court would not be able to fairly and properly determine the examinee’s application in its absence. At the same time, it is important that the examination process not be frustrated by the release of confidential information which may disclose the matters upon which the examinee is sought to be examined and that the person seeking access is not doing so without good cause or engaging in a fishing exercise to make out his or her ground of challenge.[16]

[16]Re Dalstonville, [15] (citations omitted).

The Plaintiffs contend that the Examinee does not have an arguable case that there is no longer any legitimate purpose for the examination or that his continued examination would be an abuse of process. They say that the Current MacKinnon Affidavit illuminates their purpose in conducting the resumed examination.

The Plaintiffs also submit that the Court will see from its own examination of the Confidential Affidavits that it is able to determine the application to discharge the Summons and/or the Resumption Order without recourse to them.

Consideration

In ‘other matters’ in the Access Refusal Order, I stated that my reasons for that decision would be given with these reasons, and I went on to state as follows:

Suffice to say at this point in time that I have formed the view that access to the Confidential Affidavits is not likely to assist in determining the correctness of the Examinee’s challenge to the Summons and the Resumption Order, as the Court is able to fairly and properly determine that challenge in the absence of those affidavits.
I note for the record that this would have been my decision on the Access Application, irrespective of whether or not the Examinee has an arguable case for setting aside the Summons and/or the Resumption Order.

I will now give my reasons for refusing the Access Application.

At the time of determining the Access Application, I reviewed the Confidential Affidavits and the Current MacKinnon Affidavit, along with the First and Second Roberts’ Affidavits, the Examinee’s First and Second Written Submissions, and the Plaintiffs’ First Written Submissions.

It must be borne in mind that access to confidential affidavits is not mandatory once an arguable case to challenge the examination summons is identified. Rather, access to confidential affidavits is an exercise of the Court’s discretion.

It is important to note at this juncture that the Examinee does not contend that the issuing of the Summons was an abuse of process. Mr Mawhinney does not challenge the issuing of the Summons or the earlier iterations of his examination. What is under challenge is the continuation of his examination, as exemplified by the Resumption Order.

That being the case, no cogent explanation has been given to me as to how access to the First Confidential Affidavit is required for the purpose of properly and fairly determining the current challenge. That affidavit was sworn some 16 months ago and was the basis for issuing the Summons in the first place.

I do not regard paragraph 11 of the Plaintiffs’ First Written Submissions in the way contended for by the Examinee. An aspect of this which the Examinee does not appear to have taken into account is that I have presided over the entirety of his examination, along with the examination of the other examinees in respect of whom summonses have been issued pursuant to s 596B of the Act. It is of no surprise to me, and it ought be of no surprise to anyone else, that a liquidation which has been underway for some 18 months or so has developed considerably since the First Confidential Affidavit was sworn.

The Second Confidential Affidavit was relied upon by the Plaintiffs in seeking the Resumption Order and I had regard to it in making that order. After the Examinee filed his interlocutory process, Mr MacKinnon swore the Current MacKinnon Affidavit. I can only presume that this was intended to place information before the Court as to the resumption of Mr Mawhinney’s examination in a form which the Plaintiffs did not wish to keep confidential. This presumption is based on the fact that no confidentiality order was sought and the affidavit was filed in an open manner and served on the Examinee.

I have reviewed the Second Confidential Affidavit and the Current MacKinnon Affidavit, paying particular regard to the content from the former that is not included in the latter. I do not consider that material to be likely to assist me in fairly and properly determining the Application in its absence. Nor do I consider it necessary for the Examinee to have access to the Second Confidential Affidavit, as he has the benefit of the Current MacKinnon Affidavit which sets out the matters upon which the Plaintiffs wish to examine him.

Accordingly, I refused the Access Application. For the reasons set out above, I did not need to form a view as to whether or not the Examinee had an arguable case in respect of the Application, as I reached the conclusion that irrespective of whether he did have an arguable case, access to the Confidential Affidavits was not required in order to properly and fairly determine the challenge to Mr Mawhinney’s continued examination. For this reason, I have not summarised here the parties’ submissions in respect of the arguable case component of the Access Application. Nonetheless, those submissions are relevant to the Application and will be included in that part of this ruling.

Evidence
Other proceedings involving the IPO Wealth Group
Accloud Shares Proceeding

In respect of the Accloud Shares Proceeding (defined below), Mr MacKinnon deposes that:

(a) Together with one of the SPVs, IPO Wealth Holdings No 3 Pty Ltd (in liq) (‘IPO3’), the Plaintiffs commenced proceeding number S ECI 2021 00016 in this Court on 7 January 2021 against 101 Investments, Accloud plc (‘Accloud’) and Mr Mawhinney (‘Accloud Shares Proceeding’).[17]

(b) The Plaintiffs and IPO3 seek a declaration that IPO3 validly terminated a purported sale of 21,250,000 shares in Accloud to 101 Investments pursuant to a share sale agreement dated 4 October 2019 (‘Share Sale Agreement’). In the alternative, the Plaintiffs seek a declaration that the Share Sale Agreement was an insolvent and uncommercial transaction of IPO3, alternatively an unreasonable director-related transaction of IPO3, and is therefore a voidable transaction within the meaning of s 588FE of the Act.[18]

(c) In addition, the Plaintiffs and IPO3 seek declarations that, by his conduct with respect to the Share Sale Agreement, Mr Mawhinney contravened ss 181 and/or 182 of the Act, further or alternatively, his general law duties to IPO3. Further or alternatively, they seek declarations that 101 Investments is a person who was involved in contraventions of the Act within the meaning of ss 181(2), 182(2) and 79 of the Act.[19]

[17]Current MacKinnon Affidavit, [12].

[18]Current MacKinnon Affidavit, [13].

[19]Current MacKinnon Affidavit, [14].

In respect of the Accloud Shares Proceeding, Mr Roberts deposes that a statement of claim and defences by the three defendants have been filed, along with requests for further and better particulars of the first and third defendants’ defences and the provision of those particulars.[20] Copies of the pleadings and particulars are exhibited to the First Roberts Affidavit.
[20]First Roberts Affidavit, [17]–[22].

Convertible Note Proceeding

In respect of the Convertible Note Proceeding (defined below), Mr MacKinnon deposes that:

(a) The Plaintiffs and IPO3 commenced proceeding number S ECI 2021 01835 in this Court on 31 May 2021 against 101 Investments, Mr Mawhinney, Mayfair 101 Limited (‘Mayfair 101’), Eleuthera Group Pty Ltd (‘EG’) and Online Investments Pty Ltd (‘Online Investments’) (‘Convertible Note Proceeding’). Mayfair 101 is a company registered in the United Kingdom which at all material times was controlled by Mr Mawhinney. EG is a company registered in Australia which at all material times was controlled by Mr Mawhinney. [21]
[21]Current MacKinnon Affidavit, [15].

(b) The proceeding relates to a payment by IPO3 of $2,889,502 between 1 August 2018 and 11 April 2019 pursuant to the terms of a convertible note agreement between Mayfair 101, Accloud Switzerland AG (‘Accloud Switzerland’) (establishment pending) and Ross James (an Accloud director) (‘Convertible Note Agreement’).[22]
[22]Current MacKinnon Affidavit, [16].

(c) The Plaintiffs and IPO3 seek, inter alia, orders that 3,048,000 shares in Accloud which were issued by Accloud to either 101 Investments or Mayfair 101 pursuant to the terms of the Convertible Note Agreement, and the proceeds of sale of those shares, are held on a resulting trust for IPO3.[23]

(d) The Plaintiffs and IPO also seek declarations against Mr Mawhinney that by his conduct in nominating 101 Investments to be issued those shares (assuming that to be the case), Mr Mawhinney contravened ss 181 and/or 182 of the Act, further or alternatively, his general law duties to IPO3.[24]

(e) Further or alternatively, the Plaintiffs and IPO3 seek declarations against Mayfair 101, alternatively 101 Investments, further or alternatively EG and Online Investments that they were involved in contraventions of the Act within the meaning of ss 181(2), 182(2) and 79 of the Act.[25]

[23]Current MacKinnon Affidavit, [17].

[24]Current MacKinnon Affidavit, [18].

[25]Current MacKinnon Affidavit, [19].

In respect of the Convertible Notes Proceeding, Mr Roberts deposes that an originating motion, amended originating motion, a statement of claim and an amended statement of claim have been filed.[26] Copies of the originating process and pleadings are exhibited to the First Roberts Affidavit.
[26]First Roberts Affidavit, [24]–[27].

The BVI Proceeding

In respect of the BVI Proceeding (defined below), Mr MacKinnon deposes as follows:

(a) 101 Investments issued proceeding BVIHCOM 2021/0004 against EG, IPO Wealth Holdings and IPO3 on 18 January 2021 in the Eastern Caribbean Supreme Court in the High Court of Justice Virgin Islands Commercial Division (‘BVI Proceeding’).[27]
[27]Current MacKinnon Affidavit, [20].

(b) 101 Investments seeks, inter alia, declarations regarding a facility agreement which it claims to have entered into as borrower with EG as lender on 15 July 2020 (‘EG Facility Agreement’), in particular that:[28]
[28]Current MacKinnon Affidavit, [21].

(i) an amount of AUD19,460,672.96 (allegedly paid by EG and Sunseeker Trust (another entity associated with Mr Mawhinney) to IPO Wealth Holdings as consideration for the Accloud shares sold by IPO3 to 101 Investments pursuant to the Share Sale Agreement) is owing by 101 Investments to EG pursuant to the EG Facility Agreement, subject to further interest which continues to accrue as set out in the EG Facility Agreement;

(ii) the amount of AUD2,962,313.68 (allegedly drawn by 101 Investments under the EG Facility Agreement to fund its acquisition of shares in Paymate India) (‘Paymate India Shares’) is owing by 101 Investments to EG pursuant to the EG Facility Agreement, subject to further interest which continues to accrue as set out in the EG Facility Agreement; and

(iii) the amount of AUD9,341,698.07 (allegedly drawn by 101 Investments under the EG Facility Agreement to fund its participation in a revenue share agreement with Accloud Switzerland and Ross James) (‘Accloud Revenue Share Agreement’) is owing by 101 Investments to EG pursuant to the EG Facility Agreement, subject to further interest which continues to accrue as set out in the EG Facility Agreement.

(c) The payments which originally funded both the purchase of the Paymate India Shares that were registered in the name of 101 Investments and the participation of 101 Investments in the Accloud Revenue Share Agreement were all made by IPO Wealth Holdings.[29]

[29]Current MacKinnon Affidavit, [22].

In the Further MacKinnon Affidavit, Mr MacKinnon deposes to the following in respect of the Paymate India Shares:

(a) The Plaintiffs had previously sought undertakings from 101 Investments and Mr Mawhinney to not dispose of the Paymate India Shares registered in the name of 101 Investments. This undertaking was not given.[30]
[30]Further MacKinnon Affidavit, [3].

(b) 101 Investments contends that the funds advanced to it to purchase the Paymate India Shares have been repaid by EG.[31]
[31]Further MacKinnon Affidavit, [3].

(c) The Plaintiffs are concerned that 101 Investments may now be in the process of disposing of the Paymate India Shares, so they instructed their solicitors to write to RGL (who act for 101 Investments in the Accloud Shares Proceeding and the Convertible Note Proceeding) on 11 November 2021 seeking:[32]
[32]Further MacKinnon Affidavit, [5].

(iv) advice as to whether or not 101 Investments had disposed of or entered into arrangements to dispose of any of the shares;

(v) if it had, details regarding the number of shares sold and the amount received for them; and

(vi) an undertaking that the proceeds of any sale would be held in trust until such time as the claim by IPO Wealth Holdings against 101 Investments is determined.

(d) RGL replied to this letter on 15 November 2021 by email, stating as follows:[33]

We are still obtaining instructions from our client and will revert in due course, however we are instructed to advise at this stage that our client does not intend to deal in the Paymate shares in the short term.

[33]Further MacKinnon Affidavit, [9].

Mr Roberts deposes that the Plaintiffs are actively participating the BVI Proceeding, have engaged the law firm Walkers in the British Virgin Islands and have launched a jurisdictional challenge.[34]
[34]Second Roberts Affidavit, [15].

Purpose/intention for the resumed examination of Mr Mawhinney

Mr MacKinnon deposes that at the resumed examination, the Plaintiffs intend to examine Mr Mawhinney about the following matters:

(a) the payments made by IPO Wealth Holdings for the Paymate India Shares and the Accloud Revenue Share Agreement, as referred to in paragraph 44(c) above, which 101 Investments has asserted were repaid to IPO Wealth Holdings by EG;[35] and

(b) a holding of 244,325 shares in Liven Pty Ltd registered on a non-beneficial basis in the name of EG (‘Liven Shares’) which were disclosed in various books and records in the possession of the Plaintiffs as an asset of another SPV, IPO Wealth Holdings No 11 Pty Ltd (‘IPO11’).[36]

[35]Current MacKinnon Affidavit, [23(a)].

[36]Current MacKinnon Affidavit, [23(b)].

Mr MacKinnon deposes that some questions were put to Mr Mawhinney about these matters on previous days of the examination but says they were not extensive. He says that the Plaintiffs have a number of further areas of enquiry they wish to pursue in relation to these matters, particularly because they involve significant potential recoveries in the liquidation of the IPO Wealth Group.[37]
[37]Current MacKinnon Affidavit, [24].

Mr MacKinnon also deposes that neither of the payments referred to in paragraphs 44(b)(ii) and 44(b)(iii), nor the Liven Shares are the subject of proceedings which the Plaintiffs have issued.[38] Mr Roberts deposes that this is incorrect, as the payments in respect of the Paymate India Shares and the Accloud Revenue Share Agreement are the subject of the BVI Proceeding.[39] I pause to observe that Mr Roberts appears to have misunderstood what Mr MacKinnon said in this regard: Mr MacKinnon said those payments were not the subject of proceedings which the Plaintiffs have issued, not that they were not the subject of proceedings generally.
[38]Current MacKinnon Affidavit, [25].
[39]Second Roberts Affidavit, [15].

Mr MacKinnon deposes that the Plaintiffs do not intend to use the resumed examination to examine Mr Mawhinney in relation to any of the matters that are the subject of the proceedings which are already on foot, or to use the examination as a dress rehearsal for cross-examination in those proceedings.[40]
[40]Current MacKinnon Affidavit, [26].

On the other hand, Mr Roberts deposes that:[41]

Mr Mawhinney maintains that the liquidators through examination on this topic are seeking to impermissibly obtain a forensic advantage as liquidators of the defendant companies in the BVI proceedings, impose undue pressure on Mr Mawhinney in relation to those proceedings and conduct a ‘dress‑rehearsal’ of cross-examination in the BVI proceedings in the event that their jurisdictional challenges are unsuccessful.
[41]Second Roberts Affidavit, [17].

Previous examinations of Mr Mawhinney

As indicated above, Mr MacKinnon says that the previous examinations of Mr Mawhinney on the topics referred to in paragraph 47 above have not been extensive.

Mr Roberts deposes that Mr Mawhinney was ‘extensively examined’ on the topic of the Liven Shares and the ownership of them by EG during his examination on 20 August 2020 and 23 March 2021.[42] Mr Roberts goes on to list 12 occasions on 20 August 2020 when the Liven Shares or Liven were referred to, giving transcript references; and 49 occasions on 23 March 2021, with transcript references.[43]
[42]Second Roberts Affidavit, [6].
[43]Second Roberts Affidavit, [7]–[8].

In addition to the previous examination of Mr Mawhinney in relation to the Liven Shares, Mr Roberts deposes that there has been ‘extensive correspondence’ between the Plaintiffs’ solicitors and Mr Mawhinney regarding the Liven Shares. This includes a letter of demand dated 18 December 2020 which Mr Roberts says sets out the factual background and the Plaintiffs’ allegations regarding the Liven Shares in ‘significant detail’ and states that unless EG agrees to transfer the Liven Shares the Plaintiffs intend to issue proceedings. Mr Roberts says that a second letter of demand was sent by the Plaintiffs on 6 July 2021 in which their solicitors stated that they anticipated receiving instructions to issue proceedings regarding the Liven Shares. Copies of this correspondence and Mr Mawhinney’s reply are exhibited to the Second Roberts Affidavit. Mr Roberts says that there have also been ‘detailed discussions’ between the Plaintiffs and Liven Pty Ltd regarding the Liven Shares.[44]
[44]Second Roberts Affidavit, [10]–[14].

Mr Roberts deposes that the topic of the Paymate India Shares has been ‘examined on extensively’. He lists four occasions with transcript references for 17 August 2020; 6 occasions with transcript references for 19 August 2020; eight occasions with transcript references for 22 March 2021; and one occasion with transcript reference for 23 March 2021.[45]
[45]Second Roberts Affidavit, [18]–[22].

Mr Roberts also deposes that the topic of the Accloud Revenue Share Agreement has been ‘extensively examined on’. He lists nine occasions with transcript references for 17 August 2020; one occasion with transcript reference for 19 August 2020; and six occasions with transcript references for 22 March 2021.[46]
[46]Second Roberts Affidavit, [24]–[27].

Mr Roberts deposes that an extensive and significant number of documents have been provided to the Plaintiffs regarding the Accloud Revenue Share Agreement, the Paymate India Shares and the Liven Shares.[47]
[47]Second Roberts Affidavit, [31]–[32].

Finally, Mr Roberts deposes that in the extensive correspondence between the Plaintiffs, Mr Mawhinney and RGL over the 2020-2021 period, there has been no explanation from the Plaintiffs as to why the proposed subject matters for the resumed examination were not, and could not have been, examined on during the seven previous days. He also says that no such explanation is given by Mr MacKinnon in the Current MacKinnon Affidavit.[48]
[48]Second Roberts Affidavit, [33].

Applicable principles concerning the Application
Extension of time

The Court’s power to set aside a summons for public examination on the application of the Examinee is contained in r 11.5 of the Corporations Rules. A person served with an examination summons may apply for an order setting aside the summons within three days of its service. The Summons was served on Mr Mawhinney in July 2020. Therefore, the time permitted for applying to set it aside expired long ago.

By the time of the hearing, it was common ground between the parties that an extension of time to discharge or stay the Summons was not required in the circumstances of this case. This is correct, as it is the continuation or resumption of the examination which is objected to, rather than the issuing of the Summons or the conduct of the examination to date.

General principles

The parties did not appear to be in disagreement as to the principles applicable to the Application.

Both parties referred to Re New Tel Ltd (in liq): Evans v Wainter Pty Ltd,[49] wherein Lander J distilled the following propositions from his survey of the legislation and the authorities:[50]
[49][2005] FCAFC 114 (‘Evans v Wainter’).
[50]Ibid, [252].

…
1.The power given to the Court to summon a person for examination is a coercive power.
2.The purpose of the power is to be gleaned from the legislation.
3.The following legitimate purposes emerge:
3.1First, 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.
3.2Secondly, 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.
3.3Thirdly, the purpose is to protect the interests of the corporation’s creditors.
3.4Fourthly, 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.
3.5Fifthly, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.

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.

Submissions regarding the Application
Examinee’s submissions

The Examinee submits that the examination has apparently covered every conceivable topic regarding the examinable affairs of the company. He says that it is difficult to see that any new issue has arisen in relation to the examinable affairs of the IPO Wealth Group since the last occasion on which he was examined.

The Examinee raises the following matters in support of his Application to discharge the Summons/Resumption Order on the grounds that it is an abuse of process:

(a) he has already been subjected to seven days of examination and an eighth day is oppressive;

(b) further examination of him is not necessary because the Plaintiffs already have enough information;

(c) the resumed examination concerns matters which are the subject of other proceedings; and

(d) the Plaintiffs’ predominant purpose is to obtain a forensic advantage and is not a proper purpose.

The Examinee’s written submissions are lengthy and extensive, however it seems to me that they can be distilled in this manner, even though the four grounds I have identified overlap somewhat.

Extraordinary nature of examinations

First, it is necessary to summarise what the Examinee says about examinations generally.

It is said that in considering whether further examination of Mr Mawhinney is justified it is critical to recall that:

The power to compel a public examination has long been described as an “extraordinary power”. Examinees are required to answer questions about a company’s examinable affairs under oath and their evidence may give rise to substantive claims against them. As a result, examinations convened under Part 5.9 of the Corporations Act 2001 (Cth)… invariably involve balancing two important considerations: enabling the liquidator to collect all necessary information to discharge his/her duty to properly investigate the affairs of a company; and ensuring justice to the witness summoned to attend. …[51]

[51]Re Dalstonville, [1] (citations omitted).

Justice Finkelstein in Clark v Wood approvingly quoted Bowen LJ’s remarks in Re North Australian Territory Co[52] that:

In the first place, it must be observed that it is an extraordinary section. It is an extraordinary power; it is a power of an inquisitorial kind which enables the Court to direct to be examined — not merely before itself, but before the examiner appointed by the Court — some third person who is no party to a litigation. That is an inquisitorial power, which may work with great severity against third persons, and it seems to me to be obvious that such a section ought to be used with the greatest care, so as not unnecessarily to put in motion the machinery of justice when it is not wanted, or to put it in motion at a stage when it is not clear that it is wanted, and certainly not to put it in motion if unnecessary mischief is going to be done or hardship inflicted upon the third person who is called upon to appear and give information.[53]

[52](1890) 45 Ch D 87.

[53]Clark v Wood (1997) 78 FCR 356, 358 (‘Clark v Wood’) quoting Re North Australian Territory Co (1890) 45 Ch D 87, 93 (emphasis added).

Finkelstein J in Clark v Wood then held that:

For the reason that mischief or hardship might result from a misuse of the power to compel and conduct an examination the courts have been at pains to point out that care should be exercised before ordering an examination and that vigilance must be observed by those overseeing an examination to ensure that no injustice occurs…[54]

Mr Mawhinney has already been subjected to seven days of examination and further examination is oppressive

[54]Ibid, 358.

The Examinee submits that the authorities make clear that examinations cannot be used vexatiously, oppressively or to harass an examinee.[55] There is necessarily a limit in terms of duration of an examination where, irrespective of whether there are further examinable affairs of the company to be examined on, the liquidators will have exhausted their right to examine a single witness. The requirement of ‘ensuring justice to the witness summoned to attend’ does not permit endless examination. To apply a comparison to civil litigation, in all but the most complicated of trials, cross‑examination of a single witness for eight days in a single proceeding would be unjustifiable. In ASIC v Karl Suleman Enterprises it was held that a court may determine that an adjourned examination should not be allowed to resume at all, ‘especially one that has been frequently adjourned or adjourned over a long period of time’.[56]
[55]Newheadspace Pty Limited (in liq) (2020) 144 ACSR 224, [107], [118] (‘Newheadspace’).
[56]ASIC v Karl Suleman Enterprises; Application of Stoliar (2003) 44 ACSR 694, [25] (‘ASIC v Karl Suleman Enterprises’).

The Examinee submits that the emphasis that the Plaintiffs place upon the expression ‘without the provision of a further affidavit’ in the passage cited by each party from ASIC v Karl Suleman Enterprises, referring to the Plaintiffs’ submissions below at [118]–[119] is inappropriate in circumstances where:

(a) the Plaintiffs say that the Confidential Affidavits ‘are not relevant’ to the Application and ‘the liquidation has developed considerably since then and the matters that are relevant to the continued examination are contained in’ the Current MacKinnon Affidavit;[57] and

(b) the Current MacKinnon Affidavit lacks sufficient detail to justify continued examination for the ‘unusual’ plan for an eighth day of examination of a single witness.

[57]Plaintiffs’ First Written Submissions, [11].

The Examinee submits that the Court’s comments in ASIC v Karl Suleman Enterprises were made in circumstances where the examinee had been examined on 21 June 2002 and then on 13 September 2002. The application in that case was to prevent a third day of examination planned for 17 February 2003.[58] The entity in liquidation, Karl Suleman Enterprises Pty Ltd, had as its primary business ‘raising funds from investors with a promise to pay significant returns to them over time. [That entity] raised approximately $140 million from investors’.[59] The complexity of that liquidation is said to be comparable to the present case. Austin J’s comments at [25] and [37] to [42] must be understood in the context of a third day of examination of an examinee in a complex liquidation.
[58]ASIC v Karl Suleman Enterprises, [8]-[13].
[59]Ibid, [2].

The Examinee submits that the Court must take into account a requirement of proportionality and consideration of the efficient use of Court resources as well as the prejudice to examinees. This is said to be especially so in circumstances where the liquidators have other sources of information – and other witnesses they could examine under s 596B, as well as subpoenas, conventional discovery, and preliminary discovery. It is said to be relevant and revealing that the Current MacKinnon Affidavit does not state that the liquidators ‘cannot obtain sufficient information as to any of the issues in the proceeding from the sources already available to’ them.[60] It is also said to be relevant that no explanation has been offered as to why the topics outlined in the Current MacKinnon Affidavit could not have been examined upon in the previous seven days of examination.
[60]Sent v Andrews (2002) 6 VR 317, [26] (‘Sent v Andrews’).

The Plaintiffs already have extensive knowledge

The Examinee submits that the more knowledgeable an examiner is about the company, and potential or pending claims, the stronger the inference that the examination is being used to obtain an improper forensic advantage, dress rehearse cross-examination and/or apply settlement pressure.[61]
[61]Ibid, [21]-[27].

In this examination the current and proposed proceedings related to the eighth day of examination topics include:

(a) BVI Proceeding;

(b) the proposed proceeding in relation to Liven outlined in the letters of demand exhibited to the Second Roberts Affidavit; and

(c) the proceedings foreshadowed by [23] and [24] of the Current MacKinnon Affidavit.

In the Examinee’s submission, ordinarily, ‘the liquidator comes to the company with limited or no knowledge of the company’s assets, business and affairs’ and a purpose of the examination procedure is to deal with this information asymmetry.[62] However, if a liquidator has already demonstrated ‘a wealth of information as to the company’s case’ then it is submitted that the inference can be drawn that the examination is being used improperly.[63] The Examinee submits, adapting the language of the Victorian Court of Appeal in Sent v Andrews, that the Current MacKinnon Affidavit does ‘not disclose that the [Plaintiffs] cannot obtain sufficient information as to any of the issues in the proceeding from the sources already available to’ them.[64] The Examinee submits that the Plaintiffs have ‘access to all the information that the company could have obtained’ and do not suffer under a disadvantage because they ‘came to the company ignorant of its history’.[65] Although the credibility of Mr Mawhinney ‘may be a matter which the [Plaintiffs] would wish to weigh in determining whether to prosecute the litigation … that benefit is relatively insignificant when compared with the forensic advantage of a full rehearsal of a vital part of the proceeding’ and is therefore improper.[66]
[62]Ibid, [22] quoting Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 120 ALR 262 (‘Grosvenor Hill’).
[63]Ibid, [23].
[64]Ibid, [26].
[65]Ibid, [26].
[66]Ibid, [26].

The Examinee submits that, in the present examination, the Plaintiffs have demonstrated that they have extensive knowledge of, and a readiness to commence proceedings in relation to, the proposed examination topics through inter alia:

(a) the previous examination questions and topics outlined in the Second Roberts Affidavit from [6]-[27];

(b) the level of knowledge generally demonstrated by the topics and detailed and extensive questioning over the previous seven days of examination;

(c) the extensive documents, email and Xero access they have been provided with by Mr Mawhinney;

(d) the detailed letters of demand to Mr Mawhinney, and negotiations in relation to, the shares in Liven and Liven Pty Ltd outlined at [10]-[14] of the Second Roberts Affidavit;

(e) the assertion by the Plaintiffs through Thomson Geer’s letter dated 18 December 2020 that ‘in the absence of [Eleuthera] agreeing to sign a transfer for the Shares, it is the intention of the Company to institute proceedings seeking, inter alia, an order for the transfer of the [Liven] shares’;

(f) the assertion in Thomson Geer’s letter dated 6 July 2021 that ‘we anticipate receiving instructions to issue proceedings seeking a declaration’ that IPO11 is the owner of 244,325 Liven shares and ‘orders requiring Liven to amend its share register accordingly’;

(g) the fact that the Plaintiffs have been in office as liquidators since 17 September 2020 and have been in control of the IPO Wealth Group as liquidators for more than a year; and

(h) the fact that the Plaintiffs were joint and several receivers and managers of the IPO Wealth Group from 22 May 2020.

In the context of a proposed eighth day of examination of a single examinee in the present case, the Examinee submits that the Plaintiffs have exhausted their time in which to complete the ‘jigsaw’[67] of evidence concerning the affairs of the company that is fair to an individual examinee. Furthermore, the Examinee submits that the Plaintiffs have other means available to them to complete the jigsaw, including s 596B examination of other witnesses. Despite the complexity of this liquidation, it appears that the only other individuals examined by the Plaintiffs have been Omiros Emmanouilides, Robert Cilia and Ifigenia Emmanouilides. These individuals are relevant to the Italian investments Mr Mawhinney was involved with,[68] and they are not relevant to the proposed topics of examination outlined in the Current MacKinnon Affidavit. It is submitted that it is abnormal that the Plaintiffs have focused almost exclusively on Mr Mawhinney in their examinations rather than examination of other witnesses under s 596B.
[67]ASIC v Karl Suleman Enterprises, [42].
[68]Examination of Mr Mawhinney, 23 March 2021 at T160, 16-24.

Additionally, given the previous seven days of examination and the other investigations they have conducted, the Examinee submits that there are powerful indications that the Plaintiffs have already assembled the jigsaw and what is now intended is to use the completed jigsaw to conduct a dress rehearsal of cross‑examination in proceedings, apply settlement pressure and obtain a forensic advantage not otherwise available to them through normal pre-trial procedures.

The resumed examination concerns matters which are the subject of other proceedings

The Examinee submits that the matters on which he is to be examined in the resumed examination overlap to such an extent with matters which are the subject of other proceedings that the Court will infer that the resumed examination’s real purpose is to gain an improper forensic or tactical advantage.

The Examinee submits that the overlap between the BVI Proceeding with the proposed examination topics is evident from pages 216 to 225 of the Exhibit Bundle to the Current MacKinnon Affidavit. The Paymate India investment and the Accloud Revenue Share Agreement, and the funding thereof via the EG Facility Agreement, are the subject of the existing BVI Proceeding. These are the same transactions referred to in [22] and [23(a)] of the Current MacKinnon Affidavit.

The possibility that a forensic advantage, not available from ordinary pre-trial procedure by a liquidator, will be obtained will not in of itself render examination abusive. But it will do so where the forensic advantage is the sole or predominant purpose.[69]
[69]Sent v Andrews, [11]; Re ACN 168 479 614 Pty Ltd [2020] VSC 333, [10].

The Examinee submits that there is no principle that confines the forensic advantage principle to only extant Australian proceedings. Nor is there any policy reason to exclude the principle from operating where there are foreign proceedings involving the examining liquidators or where the insolvent company is a plaintiff or defendant.

Nor, in the Examinee’s submission, is the principle prohibiting the abusive use of examinations confined to situations where the liquidators or the insolvent company are the plaintiffs in related proceedings. In Re Auto Import Company Australia Limited it was held that the abuse of process principle applied where the insolvent company was a defendant.[70] The Plaintiffs accepted this proposition.
[70]Re Auto Import Company Australia Limited (1925) 25 SR (NSW) 52.

The Examinee submits that there is greater risk of an examination being abusive where related proceedings have commenced and ‘an abuse of process may be more readily exposed once proceedings are already on foot’.[71]
[71]ACN 004 410 833 Ltd (formerly Arrium Limited) (in liq) v Walton [2020] NSWCA 157; 383 ALR 298, [50] citing Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWR 582, 585.

The Examinee refers to Sent v Andrews to support the submission that the test for an abuse of process in an examination that is related to proposed or current litigation is whether the examination is:

… genuinely for the information of the liquidator to aid him in considering whether there is a cause of action upon which he will proceed; and the court will be alive to the possibility of oppression where the application is merely to advance the action, whether actual or proposed’.[72]

[72]Sent v Andrews, [11] (footnote omitted).

In the Examinee’s submission, the Plaintiffs’ First Written Submissions and the Access Refusal Order indicate that the Confidential Affidavits are not relevant to the proposed examination topics outlined in the Current MacKinnon Affidavit. That affidavit at [23] is said to provide almost no detail about the proposed examination topics other than in the most general terms. Against the background of this case, with seven days of examination and extensive documentary production, the Examinee submits that general assertions of that kind by the Plaintiffs are not enough to establish a proper purpose for examination. Rather, the Examinee submits that the Plaintiffs should have been able to identify, and articulate, precisely the sort of information they are seeking from Mr Mawhinney in the proposed eighth day of examination. They cannot rely on any suggestion that they are “keeping their powder dry”, seeking to avoid informing Mr Mawhinney of what they wish to learn from him – any submission to that effect would confirm that the purpose of examination is to extract some advantage from the process by examining Mr Mawhinney in a way that works to his detriment. The examination procedure is not for strategic benefit; it is for information gathering. The Examinee submits that the Plaintiffs would suffer no prejudice in pursuing a proper purpose if they were to reveal, with detail and precision, the sort of information they wish to learn from Mr Mawhinney; and that, from their failure to do so, the Court should infer that the Plaintiffs’ purpose in the examination is some other purpose.

The Examinee does not go so far as to insist that the Plaintiffs must give over a list of questions. But, the Examinee says that the Plaintiffs should be able to articulate the list of proposed topics in sufficient detail to establish that those topics have not yet been traversed in the examination, and are not impermissibly overlapping with issues in pending litigation.

The Examinee submits that the Court needs to exercise ‘vigilance’[73] and must be ‘alert to the possibility that a proposed application might be used for an improper purpose’[74] and ‘ensuring justice to the witness summoned to attend’.[75] In the absence of such evidence from the Plaintiffs, the inferences outlined below should be made.
[73]Clark v Wood, 358.
[74]Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, 518–519.
[75]Re Dalstonville, [1].

Mr MacKinnon’s statement he and Mr Giasoumi ‘do not intend to use the further examination to examine Mr Mawhinney in relation to any of the matters which are the subject of the proceedings that are already on foot, nor to use the examination as a dress rehearsal for cross-examination in those proceedings’[76] is a bare assertion according to the Examinee. The Examinee contends that if this were indeed the case, the Plaintiffs would have explained what information they intend to seek.
[76]Current MacKinnon Affidavit, [26].

Abuse of process

The Examinee accepts that the ‘onus of establishing whether there has been an abuse of process or oppression is on the applicant’.[77] However the Examinee submits that the onus is not heavy in this particular case. The Examinee submits that the onus must be met on the balance of probabilities as with any other civil application, and that the Briginshaw principle does not have any apparent application. Further, the onus of proof should also be understood in light of the requirement that ‘vigilance must be observed by those overseeing an examination to ensure that no injustice occurs’.[78] The balancing exercise required between ‘enabling the liquidator to collect all necessary information to discharge his/her duty to properly investigate the affairs of a company; and ensuring justice to the witness summoned to attend’ is also said to be relevant.[79]
[77]Newheadspace, [105].
[78]Clark v Wood, 358.
[79]Re Dalstonville, [1].

The Examinee refers to a passage in Re ACN 168 479 614 Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed):[80]

The fact that a forensic advantage in other litigation may be one purpose for seeking an examination summons will not, of itself, constitute an abuse of process. In Re Global Medical Imaging Management Ltd (in liq), Santow J observed that:
The position is well established in Australia that a liquidator may, without abuse of process have the purpose which this liquidator says was his purpose, provided that purpose is a genuine one not subordinated to the purpose of seeking forensic advantage. That is, to seek information to prosecute causes of action for potential recovery, to determine if any of these causes of action should be abandoned and to determine whether any other causes of action should be added. That such a purpose may be associated with the purpose of obtaining forensic advantage in the litigation, does not vitiate the first purpose, so long as that associated purpose of forensic advantage is not the dominant purpose…
Moreover the onus is on the applicant who seeks to set aside the examination summons to prove that the liquidator is engaged in an abuse of process; Powell JA with whom Mahoney and Meagher JJA agreed in Sherlock v Permanent Trustee Australia Ltd (1996) 22 ACSR 16 at 20. That the onus is a heavy one is borne out by the fact that the applicants must show that the pursuit of forensic advantage was the dominant purpose of the liquidator…

[80][2020] VSC 333, [10] (footnotes omitted).

The Examinee submits that this statement was not made in the context of an abuse of process where there was an examination with multiple adjournments and adjournments over a long period of time.[81] Accordingly, the comments about ‘a heavy onus’ should be read in light of the comments in ASIC v Karl Suleman Enterprises and the points already made. Essentially, the ‘heavy onus’ on an examinee becomes lighter the longer the examination of a single witness goes on and may ultimately shift the evidentiary burden onto the examiners to justify the resumption and continuation of the examination.[82] This is said to be significant in circumstances where the Plaintiffs say that the Confidential Affidavits ‘are not relevant’ to the application and ‘the liquidation has developed considerably since then and the matters that are relevant to the continued examination are contained in’ the Current MacKinnon Affidavit; and that affidavit is lacking in sufficient detail to justify the resumption.
[81]Re Global Medical Imaging Management Limited (in liq), [4]-[8].
[82]A proposition which Mr Mawhinney submits is suggested by [25] and especially [41] of ASIC v Karl Suleman Enterprises).

In the Examinee’s submission, an examination can be an abuse of process from the beginning, or it can become an abuse at a ‘subsequent point in time’ and if so the ‘court will find no difficulty in moulding an order appropriate to prevent any abuse of its process’.[83]
[83]Newheadspace, [107] citing Re Hugh J Roberts Pty Ltd (in liq) (1969) 91 WN (NSW) 537, 539,

It is submitted that an examination is an abuse of process if ‘the predominant purpose is to exert pressure on the examinees to enter into a settlement’ and examinations can be oppressive ‘if their real purpose was simply to exert pressure by inflicting costs, or causing undue inconvenience or embarrassment to the defendant’.[84]
[84]Ibid, [118] citing Re Qintex Group Management Services Pty Ltd (in liq) [1997] 2 Qd R 91, 95.

The Examinee again refers to Sent v Andrews:

Orders for the issue of summonses for examinations will be set aside if they are oppressive, unfair or an abuse of the process of the court. Where an examination relates to proposed or current litigation, in general terms the question is “whether the examination is genuinely for the information of the liquidator to aid him in considering whether there is a cause of action upon which he will proceed; and the court will be alive to the possibility of oppression where the application is merely to advance the action, whether actual or proposed.” The strength or weakness of the claim of a company in liquidation against a third party concerns the examinable affairs of the company. Gathering information may involve testing and assessing the credibility of the witnesses who provide the information. The liquidator is not entitled, however, to conduct a dress rehearsal of the cross-examination in an action or to seek to damage the opposing party’s case by attacking the credibility of that party’s witnesses.[85]

[85]Sent v Andrews, [11] (footnotes omitted).

The Examinee also refers to Newheadspace, which sets out some background to Sent v Andrews:

In that case, unlike the ordinary position where the liquidator comes to the company with limited or no knowledge of the company, the liquidator had a wealth of information as to the company’s case in litigation on foot against the proposed examinees. Those proceedings turned upon whether the Court accepted the oral evidence of one side’s witnesses or the other.[86]

[86]Newheadspace, [136].

The Examinee then raises the decision of Buchanan JA in Sent v Andrews, who held that:

Accordingly, the respondent needs no further information to mount the company’s case, and the battle lines between the parties have been clearly drawn. While the issue is the respondent’s purpose and not the result which will ensue from the examination, the result may found an inference as to the respondent’s purpose. I would infer from the known facts that the principal benefit, which the respondent intends to gain from the examinations, is to conduct a rehearsal of the cross-examination of the appellants so as to be in a better position to meet Primelife’s case. …[87]

[87]Sent v Andrews, [24] (footnotes omitted).

The Examinee submits that given the extensive examination spread over more than a year, and the timing of the resumed examination now in the face of litigation in the Supreme Court, there is a powerful inference that the pursuit of forensic advantage is now the objective of the Plaintiffs in seeking an eighth day of examination.

The Examinee also submits that there is at least a powerful inference that examining Mr Mawhinney about the examinable affairs of the IPO Wealth Group is not their primary purpose. They have done so extensively (and of course, any incompetent or inadequate examination earlier would not justify them being allowed to “return for their hat”).

In the Examinee’s submission, the onus upon him to establish an improper purpose can be satisfied by these inferences being drawn.

Plaintiffs’ submissions
Alleged delay

While the Plaintiffs do not contend that the Examinee requires an extension of time in order to bring the Application, they do submit that there is a complete absence of credibility in his application given his significant delay in filing it.

The Court made orders listing the hearing of the examination on 6 August 2021 and Mr Mawhinney made his application for discharge on 18 October 2021 – more than two months later and exactly one week before the hearing of the examination. In the Plaintiffs’ submission, the Application is nakedly a delay tactic rather than a manifestation of genuine concern on Mr Mawhinney’s behalf. This is said to be exposed in stark terms by paragraph 4(b) of the Examinee’s First Written Submissions, which provides that he sought:

In the event that [his application to dismiss or stay the examination was] unsuccessful, an adjournment or stay of the examination, to permit him to appeal in relation to these matters.

The Plaintiffs submit that this extraordinary request discloses Mr Mawhinney’s intention to appeal before even considering the Court’s grounds for dismissing his application, if that is what the Court does. Absent doing so, it is submitted, he cannot contend to be concerned by judicial error and consequential injustice. He must be concerned only with obstruction.

Purpose of the resumed examination

The Plaintiffs accept that the Court has an inherent power to discharge the summons if it considers that it is now intended to be used by the liquidators for a purpose extraneous to the purposes of the Act. However, the Plaintiffs submit that there is no such intention. They say that the mere fact that there have been several days of examination previously, and that proceedings relating to some transactions of the IPO Wealth Group have been commenced, does not support a conclusion to the contrary. There are 17 companies in liquidation with some $80 million having been invested in a variety of local and overseas debt and equity investments. As the Court has already seen, the companies’ books and records are unsatisfactory and, it is submitted, Mr Mawhinney has at times been less than forthcoming in his answers to questions.

The Plaintiffs submit that the affairs of the IPO Wealth Group are complicated by numerous obscure transactions. It is to be expected that, in these circumstances, the Plaintiffs require time between examinations to examine Mr Mawhinney’s evidence in the light of the books and records which they have been able to recover and their other enquiries. The Plaintiffs submit that it should be hardly surprising that, before concluding Mr Mawhinney’s examination, they have hastened to commence proceedings to preserve and recover assets which they have traced to overseas jurisdictions.

The Plaintiffs reiterate that Mr Mawhinney has the onus of satisfying the Court that the Plaintiffs intend to use the further examination for improper purposes, and say that there is no material which demonstrates such an intention. It follows, then, that the examination should proceed subject to the Court’s usual supervisory powers.

The Plaintiffs rely on the same passage from Evans v Wainter as set out in paragraph 62 above.

The Plaintiffs submit that the key objective of the public examination process is to allow a liquidator or other eligible applicant to procure information in relation to the examinable affairs of the company in liquidation. As Lander J explained in Re Southern Cross,[88] this information gathering exercise serves a number of distinct public purposes, including to protect the interests of creditors by assisting in the recovery of assets of the corporation for distribution to the creditors, to determine whether any person who has taken part or been concerned in the examinable affairs of the corporation may have been guilty of misconduct in relation to the corporation, and to assist in the regulation of corporations. It is further submitted that, in Evans v Wainter, his Honour identified a further purpose of the examination procedure, being to enable ‘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’.[89]
[88]Re Southern Cross Petroleum Sales (SA) Pty Ltd (in liq) v Hirsch (1998) 70 SASR 527, 534 (citations omitted).
[89]Evans v Wainter, [111].

The Plaintiffs submit that, to be legitimate, the purpose for which the examination summons is sought must be referrable to a legislative purpose. The fact that a forensic advantage in other litigation may be one purpose for seeking an examination Summons is said to not, of itself, render the use of the summons an abuse of process. The Plaintiffs refer to Re Global Medical Imaging Management Ltd (in liq),[90] in which case Santow J observed that:

The position is well established in Australia that a liquidator may, without abuse of process have the purpose which this liquidator says was his purpose, provided that purpose is a genuine one not subordinated to the purpose of seeking forensic advantage. That is, to seek information to prosecute causes of action for potential recovery, to determine if any of these causes of action should be abandoned and to determine whether any other causes of action should be added. That such a purpose may be associated with the purpose of obtaining forensic advantage in the litigation, does not vitiate the first purpose, so long as that associated purpose of forensic advantage is not the dominant purpose…

[90][2001] NSWSC 481, [12] (‘Re Global Medical Imaging Management Ltd (in liq)’).

His Honour also observed that the onus is on the applicant who seeks to set aside the examination summons to prove that the liquidator is engaged in an abuse of process, and that the said onus is a heavy one (which is borne out by the fact that the applicants must show that the pursuit of forensic advantage was the dominant purpose of the liquidator).[91]
[91]Ibid, [13].

The Plaintiffs submit, and I immediately accept, that the Court has supervisory powers in respect of examinations, both through its inherent jurisdiction and from s 596F(1) of the Act. Relevantly, that section provides that the Court may at any time give directions about the matters to be inquired into at an examination,[92] which means that if the Court is concerned that particular topics should not be the subject of examination it can make directions to that effect.
[92]Act, s 596F(1)(a).

In this regard, the Plaintiffs also rely upon Lamb v Mentha,[93] which concerned an examination where the liquidators had already commenced a proceeding which was somewhat advanced. The Plaintiffs submitted that this case demonstrates that the fact that litigation is already on foot is not an impediment to an examination occurring. In that case, Goldberg J referred to s 596F(1)(a) of the Act and gave a direction as to what subject matter could be covered at the examination.[94]
[93]Lamb v Mentha [2010] FCA 695 (‘Lamb v Mentha’).
[94]Ibid, [33].

The application to discharge the examination summons should be dismissed

The Plaintiffs submit that Mr Mawhinney does not have an arguable case that there is no longer any legitimate purpose for the examination, or that his continued examination would be an abuse of process.

The Plaintiffs also submit that Mr Mawhinney has failed to establish that they have some improper purpose in continuing the examination. It is submitted that the Current MacKinnon Affidavit illuminates the Plaintiffs’ purpose: they intend to use the examination to ask Mr Mawhinney questions specifically relating to the payments identified in paragraph 47 above and a holding of 244,325 shares in Liven Pty Ltd. Mr MacKinnon has deposed that Mr Mawhinney has not been asked about these matters extensively yet, and that the Plaintiffs wish to pursue numerous areas of further enquiry in relation to them. It is submitted that the said payments and the shares are the subject of significant potential claims,[95] and, as Santow J recognised in Re Global Medical Imaging Management Ltd (in liq), it is perfectly legitimate for the Plaintiffs to seek to elicit information for the purpose of investigating them.
[95]The payments are worth more than $12 million and, based upon the value attributed to Liven shares by Mr Mawhinney in his report as to affairs on IPO11, the 244,325 shares would be worth approximately $175,000 (see page 30 of the PDF comprising the Current MacKinnon Affidavit and its exhibit).

It is also said that, contrary to Mr Mawhinney’s submissions, neither the length nor timing of the examination nor the fact that there are two proceedings already on foot against Mr Mawhinney necessarily imply that the Plaintiffs wish to seek forensic advantage in those proceedings. The claims described in the Current MacKinnon Affidavit are not the subject of those proceedings. Further, as can be seen from Annexure A to the Plaintiffs’ report,[96] the investments that have been made by the IPO Wealth Group are extensive, valuable, and located in many countries. The Plaintiffs point out that they have many assets to recover and complicated steps to take on behalf of the investors in the IPO Wealth Group, and there is much work yet to do. The Plaintiffs submit that the fact that the BVI Proceeding concerns the Paymate India Shares does not alone provide grounds for an inference of improper purpose. The Plaintiffs say that Mr Mawhinney offers no authority for the proposition that there is greater risk of an examination being abusive where related proceedings have commenced and that is not surprising. A specific factual enquiry must be undertaken in each case.
[96]Which commences at page 31 of the PDF that comprises the exhibit to the Current MacKinnon Affidavit.

According to the Plaintiffs, the cases relied upon by Mr Mawhinney espouse general propositions to the effect that examination is the product of an extraordinary power which must be exercised with care, and that examinations may be oppressive if they continue unduly. These principles are trite and not disputed by the Plaintiffs. The Plaintiffs agree that there will be a limit in every examination beyond which liquidators would have exhausted their right to examine a single witness. But each examination is different, and the limit would also be different. A complex liquidation will necessarily require more time in examination than a straightforward one.

In his submissions, Mr Mawhinney extracts part of a sentence from ASIC v Karl Suleman Enterprises.[97] The Plaintiffs point to the whole paragraph from which the extract was taken, which provides (emphasis added):

In my view, the law gives to the court a discretionary jurisdiction which permits it to supervise the process and prevent abuses. Either the liquidator or the examinee may approach the court for orders or directions where controversy arises in the administration of the examination procedure. On the application of an examinee, the court may determine that an adjourned examination (especially one that has been frequently adjourned or adjourned over a long period of time) should not be allowed to resume either at all, or without the provision of a further affidavit. In Karounos (at 335(7)) the Full Federal Court, dealing with the comparable bankruptcy jurisdiction, remarked that such an application “will usually be determined on a broad view of the issues in the particular case and a weighing of competing principles”.

[97]ASIC v Karl Suleman Enterprises, [25].

The Plaintiffs submit that in that case, Austin J held that it was reasonable for liquidators in a complex and large investigation to resume an examination of a particular examinee in light of information they may have obtained in other aspects of their inquiry. His Honour accepted the submission of counsel for the liquidators that such an investigation was like completion of a jigsaw puzzle, which must be assembled piece by piece.[98] That remark is said to be apposite here. The facts of this case are complex and opaque, and the Plaintiffs’ tasks are immense.
[98]Ibid, [42].

The Plaintiffs further submit that, in that case, 51 days of examinations have been conducted to date; and that, while an examination pursuant to the Act is not a cross‑examination in a litigation setting, complex commercial litigation would not infrequently involve cross-examination of key witnesses for eight days or more.

Mr Mawhinney alleges that the Plaintiffs provide almost no detail about the proposed examination topics other than ‘in the most general terms’ and contends that ‘general assertions of that kind by the [Plaintiffs] are not enough to establish a proper purpose for examination.’ In the Plaintiffs’ submission this misapprehends the onus that is imposed in this Application. The Plaintiffs submit that it is not for them to establish a proper purpose. The evidentiary burden lies on Mr Mawhinney to establish that the Plaintiffs’ predominant purpose is to gain an illicit or unfair forensic advantage. In the multifaceted circumstances of the IPO Wealth Group, it is said that Mr Mawhinney cannot do so by pointing simply to the length of this examination and the fact of numerous proceedings – they are direct consequences of the complexity of the corporate structure that he himself created.

In any event, the Plaintiffs’ evidence about specific claims which they intend to investigate is submitted to preclude such an inference. In addition to the matters that are the subject of the Current MacKinnon Affidavit, the Further MacKinnon Affidavit exhibits a letter of 11 November 2021 from the Plaintiffs’ solicitors to Mr Mawhinney’s solicitors. That letter discloses that:

(a) on 13 August 2021, Mr Mawhinney’s solicitors had informed the Plaintiffs’ solicitors that 101 Investments had no then-present intention to dispose of any of the assets the subject of IPO Wealth Holdings’ claim in respect of the sum of $12,628,561.92 which was advanced to 101 Investments by IPO Wealth Holdings;

(b) Paymate India is in the process of preparing for an initial public offering and has informed its shareholders (including IPO Wealth Holdings and 101 Investments) that they can participate in an offer-for-sale process which enables existing shareholders to realise their shares as part of the initial public offering;

(c) documents which the Plaintiffs received that day suggested that 101 Investments would not be participating in the offer-for-sale process; and

(d) in those circumstances, the Plaintiffs sought (broadly) that Mr Mawhinney:

(vii) confirm whether 101 Investments had disposed of any of the Paymate India Shares;

(viii) if so, provide the details of the relevant transactions; and

(ix)undertake, along with 101 Investments, that the proceeds of any sale of the Paymate India Shares would be held in trust until such time as IPO Wealth Holdings’ claim against 101 Investments is determined.

On 15 November 2021, Mr Mawhinney’s solicitors responded by email and said:

We are still obtaining instructions from our client and will revert in due course, however we are instructed to advise at this stage that our client does not intend to deal in the Paymate shares in the short term.

The Plaintiffs say that this oblique response presents obvious concerns, not least of which is the absence of the requested undertaking and the suggestion that Mr Mawhinney and/or 101 Investments intend to deal with the Paymate India Shares at some undefined point in the future. Investigating these circumstances, along with the issue of the Liven Shares, is said to be obviously in the interests of the IPO Wealth Group companies and their investors.

The Plaintiffs submit that Mr Mawhinney will have counsel present at the examination and, in the event that the questions asked by the Plaintiffs traverse ground that has been the subject of previous examination, he will be at liberty to complain at that point. The onus upon him to establish that the Plaintiffs are engaged in an abuse of process is heavy, and it is said that he has failed to meet it.

Examinee’s reply submissions
Stay of examination pending an appeal

In response to the Plaintiffs’ submissions summarised in paragraphs 103 and 104 above, in considering the issue of a stay of the examination pending an appeal of this decision if it goes against Mr Mawhinney, he submits that it is important to recall that:

(a) by orders dated 6 August 2021, Mr Mawhinney’s examination was to resume on 25 October 2021;

(b) there were extension of time complications with aspects of the interlocutory process of 18 October 2021;

(c) the possible timetabling and return date for the interlocutory process were unknown; and

(d) it was at that time unknown to the Examinee whether the interlocutory process would be dealt with ex tempore on 25 October 2021, or on the papers between 18 October and 25 October, to enable the examination to occur as then timetabled.

Alleged delay

The Examinee submits that the allegation that the interlocutory process is ‘nakedly a delay tactic’ and a strategy of ‘obstruction’ is baseless. It is unclear on what “proper basis” the allegation is made. Any personal or professional frustration felt by the Plaintiffs has no bearing on this case. It is, in the Examinee’s submission, in large part a situation of the Plaintiffs’ own creation because:

(a) an eighth day of examination of a single witness is being proposed after extensive questioning spread over more than a year; and

(b) there is pending and prospective litigation in both Australia and the British Virgin Islands closely related to past and future topics of examination; and

(c) it is now suggested by the Plaintiffs that the Second Confidential Affidavit by which the resumption was obtained is ‘not relevant’ to this application and the ‘the liquidation has developed considerably since then’ such that the examination that the Plaintiffs now seek to conduct is different.

The Examinee says that he has not delayed in making this application, given that it concerns only the resumption of the examination. He also relies on two instances where his opposition to a resumed examination was raised in Court.

On 23 March 2021 when orders were being discussed at the end of the examination on that day, Mr Mawhinney expressed concern at the prospect that the Plaintiffs may be able to apply for a resumption of his examination.[99]
[99]Examination of Mr Mawhinney, 23 March 2021, T237.

At the conclusion of his examination on 29 April 2021, Mr Mawhinney expressly foreshadowed the present application in response to the proposed sunset order for the examination.[100] Mr Mawhinney also asked the Court what the timeframe was if he wanted to challenge an order for the resumption of his examination. I indicated that I did not think that the Court’s rules dealt specifically with it but he should check the rules, and said that an application would need to be made prior to the resumed date on notice to the Plaintiffs, at least a few days prior.[101]
[100]Examination of Mr Mawhinney, 29 April 2021, T321.
[101]Examination of Mr Mawhinney, 29 April 2021, T322.6-30.

The Examinee submits that the allegations of ‘delaying tactics’ and ‘obstruction’ are unjustifiable given that the Plaintiffs have been aware since 23 March 2021 of Mr Mawhinney’s desire to prevent a further day of examination, his concern at the unfair burden the multiple resumptions represent, and that the Court had given guidance that any application might be made ‘a few days prior’ to the resumed examination. The Examinee submits that the Plaintiffs had the opportunity to object to the guidance given to Mr Mawhinney regarding the timing of any application at that time and did not exercise it.

Consideration
Alleged delay

I do not consider that there has been a delay in making the Application which would justify its refusal. That it would have been more convenient for the Plaintiffs and also for the Court for the interlocutory process to have been filed more than a week before the scheduled resumption of the examination, particularly in light of the number of issues raised in the interlocutory process, is to be accepted. It is also unsurprising that the timing of its filing had the result of the examination not going ahead on 25 October 2021. The Examinee clearly had more than ample time to make the Application well before the scheduled resumption of his examination. However, I do not know when he engaged solicitors or counsel in respect of the resumed examination or when he sought or obtained their advice about it. Further and in light of the exchange between the Court and Mr Mawhinney on 29 April 2021 as to the process for challenging a resumed examination, I do not accept the Plaintiffs’ submissions in respect of delay and I do not regard the timing of the interlocutory process as a reason to refuse it.

In respect of the Plaintiffs’ submissions regarding the Examinee foreshadowing an appeal and seeking a stay of the resumed examination if his Application is unsuccessful, while it seems somewhat unusual to include such relief in the interlocutory process, I do not think anything much turns on it and I have not given the Plaintiffs’ submissions any weight in this regard.

Onus of establishing an abuse of process

It was common ground that the onus is on the Examinee to establish that the examination is or would be an abuse of process. I accept the Examinee’s submission that an examination can be an abuse of process from the beginning, or it can become one at some subsequent point in time. However, I do not accept the Examinee’s submission that the burden may shift onto the examiners to justify the resumption and continuation of the examination the longer the examination goes on. The passages relied on in ASIC v Karl Suleman Enterprises for this proposition[102] do not support such a generalised proposition. At paragraph 41, Austin J stated that there was no general obligation on a liquidator to supply a fresh affidavit to justify the resumption of an adjourned examination, going on to say:

However, it is open to the court to require that the liquidators provide some evidence justifying continuation of the examination process if the circumstances of the case make it appropriate to do so.

[102]See footnote 79 above.

That is far from a reversal of the onus and, in any event, here we have an affidavit from the Plaintiffs providing the evidence relied upon for the resumption of Mr Mawhinney’s examination. Therefore, in the circumstances of this case, the task before me is to assess the evidence and submissions from both parties and form a view as to whether the Application should be granted, conscious that the Examinee bears the onus.

I also do not think that ASIC v Karl Suleman Enterprises goes as far as supporting the general proposition that the onus on an examinee will become attenuated and less onerous in the circumstances of an examination which ‘has been frequently adjourned or adjourned over a long period of time’.[103] That submission seems to contradict the Examinees’ submission that Briginshaw does not apply in this circumstance, though I am not prepared to accept either submission and in any event neither submission strictly arises to be decided in this case. It suffices to say that the frequency of adjournment or length of time over which examinations have been conducted are matters of evidence which may be considered in an application of this kind, while the observations of Santow J in Re Global Medical Imaging Management Ltd (in liq) concerning the ‘heaviness’ of the onus retain their force.
[103]ASIC v Karl Suleman Enterprises, [25].

Similarly, while I accept that examinations under the Act are ‘extraordinary’ in nature, and that the Court should exercise vigilance in the supervision and management of examinations, the onus remains on the Examinee to establish an abuse of process in order that the Summons for examination on foot should be set aside.

I accept the Examinee’s submissions that the Court is able to draw inferences, however, the onus is on the party urging the drawing of those inferences to persuade the Court that it is appropriate to do so. In this instance, I am not persuaded that the inferences urged upon me by the Examinee should be made. I am not satisfied that there is a sound basis to make those inferences.

Length of Mr Mawhinney’s examination and whether further examination is oppressive or excessive

In some respects, the Examinee’s submissions appeared to be that as he had already been examined for seven days, it must be the case that any further examination was not appropriate or was somehow oppressive or excessive. Much emphasis was placed, in both written and oral submissions, on there having already been seven days of examination.

The appropriate length of an examination will vary from case to case, and from examinee to examinee. The question of whether an examination is too long or has been of such a length that further examination would be oppressive is to be determined on the circumstances pertaining to that case and that examinee. I do not accept that there having been seven days of examination already necessarily leads to the conclusion that further examination is excessive or oppressive, nor that seven days is necessarily enough for any liquidator to have answered the questions it may have about the affairs of the company. Rather, I must look to the examination that has already occurred and the context for its resumption.

I do not accept that the length of Mr Mawhinney’s examination has been oppressive or excessive or that a resumed examination for half a day would be oppressive.

In oral submissions, counsel for the Plaintiffs contended that on many occasions during his examination, Mr Mawhinney’s responses were obfuscating, and at times there was a lengthy exegesis on privilege where there was no basis for a claim of privilege. The Plaintiffs conceded that there had already been extensive examination of Mr Mawhinney, but maintained that the liquidation of the IPO Wealth Group has been complex and that they had legitimate areas to pursue which took up all the allocated time for the examination thus far.

My own observation, having presided over the previous examinations in respect of the IPO Wealth Group, is that Mr Mawhinney’s examination has been extensive but I do not consider it to have been excessive or oppressive. As I observed during the course of oral argument, my observations were that at times Mr Mawhinney’s conduct during his previous examination has been productive of delay. At times he had a tendency to make speeches rather than focus on answering the question asked of him, and on numerous occasions I had to direct Mr Mawhinney to focusing on answering the question asked. He also gave some quite lengthy answers to questions that went nowhere or did not address the question. On occasion, he appeared to be ‘playing to the gallery’ rather than directing himself to the questions asked. I raised this so that the Examinee had an opportunity to address it, and Mr Gronow stated that he did not accept these observations.

However, those observations are not the primary consideration here. Rather, as I stated above, the issue is whether there is a proper basis for resuming Mr Mawhinney’s examination.

As noted earlier, Mr Roberts deposes that no explanation has been given as to why the topics now sought to be examined on were not covered earlier. I accept the Plaintiffs’ submission that they had many issues they wished to cover in the examination of Mr Mawhinney and they had fully utilised all of the time previously allocated and not covered all the matters which they wished to raise, primarily because of the complexity of the liquidation of the IPO Wealth Group. I also accept the Plaintiffs’ submission that some of the areas examined upon or to be examined upon have evolved over time as more information has been obtained by them.

There is no doubt here that the liquidation of the IPO Wealth Group is a complex one. There are 17 entities being liquidated. There are numerous transactions, either between those entities or to other entities in the Mayfair 101 group or Mr Mawhinney or other entities associated with him. The Plaintiffs have said on numerous occasions that the books and records of the IPO Wealth Group are incomplete and the submission was made at the hearing that the accounts were in a shambolic state. It is also abundantly clear that Mr Mawhinney is at the centre of the transactions and the various companies involved in the Mayfair 101 group, including the IPO Wealth Group. That the Plaintiffs may need to examine him to obtain information is therefore hardly surprising, as is the fact that the examination has been extensive and has taken place over several days. I also do not find it particularly surprising that the Plaintiffs have identified matters upon which their examination has not concluded. While the Examinee’s submission that the Plaintiffs have other sources of information, such as documents and other witnesses they could examine, is undoubtedly true, in circumstances where Mr Mawhinney was the central figure in the IPO Wealth Group and other relevant entities, pointing to those other information sources is not indicative of the resumed examination being improper.

I accept the Plaintiffs’ submission that inconvenience to the Examinee by reason of the resumed examination does not constitute oppression. I also accept the observation of Plaintiffs’ counsel that the Examinee does not identify any form of prejudice to Mr Mawhinney associated with there being a resumed examination, other than being required to attend in a compulsory process.

Whether the Plaintiffs already have enough information such that further examination is not necessary

To the extent that the Examinee relies on the documents he or others associated with him have already produced to the Plaintiffs, which he says are extensive, to contend that the Plaintiffs have sufficient information, I do not accept the submission. It may well be that he or his associates have produced extensive documentation either as part of the examination process or separately. However, that does not mean that the Plaintiffs have all the information they need. While not particularly determinative, I also observe that on a number of occasions Mr Mawhinney took a narrow approach to what documents he ought produce and there were times when his compliance with orders for production of documents was questioned by the Plaintiffs and further orders made.

Before turning to the specific topics, I would observe that a resumed examination is not an occasion for a liquidator to go over old ground, by asking the same questions, perhaps in an attempt to see if the examinee gives consistent evidence in response. Mr Mawhinney and his legal team have the transcript of his previous examinations: they have clearly reviewed it closely already and will be more than capable of objecting to questions that have already been asked and answered if that occurs.

As noted earlier, the Second Roberts Affidavit lists instances where Mr Mawhinney was previously examined about the Liven Shares, Paymate India Shares and the Accloud Revenue Sharing Agreement. While these were listed and a short description given, there was no attempt made by the Examinee (in either the affidavit or in submissions) to go to those instances and explain how this meant that the Plaintiffs had sufficient information about those three topics. Rather, it seems I was merely being invited to infer that it constituted enough information for the Plaintiffs. Further, this concept of ‘enough’ or ‘sufficient’ information was not expanded upon or linked to the circumstances at hand, beyond the submission that if the Plaintiffs had enough information to make demands (in the case of the Liven Shares) or actively defend proceedings (in the case of the Paymate India Shares and the Accloud Revenue Sharing Agreement), then they do not need to examine Mr Mawhinney further.

I do not accept the Examinee’s submission that because Mr Mawhinney has already been examined on the Liven Shares and the shares have been the subject of correspondence and discussions between the parties means that I should infer that continued examination on the Liven Shares is not for a legitimate purpose.

I accept the Examinee’s observation that Mr MacKinnon has not been specific in his evidence in terms of precisely what it is about the Liven Shares that the Plaintiffs have additional questions about. However, I do not think that this is a reason not to allow the resumption of Mr Mawhinney’s examination in respect of the Liven Shares. There is nothing to establish that everything which the Plaintiffs could legitimately need to know about the Liven Shares has been the subject of the previous examinations and I do not consider it necessary for Mr MacKinnon to have gone further in his affidavits to explain precisely what aspects of the transactions regarding the Liven Shares he wants to examine further. Further, the Plaintiffs are entitled to examine Mr Mawhinney without an undue amount of ‘forewarning’ as to the questions to be asked of him.

I have reviewed those instances where the Liven Shares are said to have been the subject of previous examination, as identified by Mr Roberts.[104] My view/impression is that:
[104]See paragraph 53 above.

(a) rather than each listed instance being a separate instance of questions about the Liven Shares, it is more that the Liven Shares and the relevant transactions were the subject of a series of questions on those dates, most questions on a particular date following on from the other;

(b) it is certainly fair to say that there have been a number of questions asked about the Liven Shares;

(c) I cannot conclude from the questions asked and the answers given whether the previous examinations cover all matters concerning the Liven Shares that the Plaintiffs wish to examine Mr Mawhinney about. From my review of those sections of transcript, it does not seem unreasonable for the Plaintiffs to have formed the view that they need more information; and

(d) further, I cannot conclude from that review whether the content of the previous examination and the other material available to the Plaintiffs means that they have enough information and so there is no need for further examination. Mr MacKinnon is on oath as saying that the Plaintiffs need further information and have not asked everything they need to, and apart from asserting that this is not the case, the Examinee has said little of substance in response to this.

I have also reviewed the correspondence referred to by Mr Roberts as having passed between the parties in respect of the Liven Shares.[105] My view/impression is that:
[105]See paragraph 54 above.

(a) the letter of 18 December 2020 contains some detail but I would not necessarily describe it as significant detail;

(b) that letter was written nearly 12 months ago and the Plaintiffs may well have identified further aspects of the Liven Shares that they need more information about, as they have said; and

(c) the 6 July 2020 letter is very short and contains no detail, so cannot be regarded as evidencing that the Plaintiffs have sufficient information.

I have reviewed those instances where the Paymate India Shares[106] and the Accloud Revenue Sharing Agreement[107] are said to have been the subject of previous examination, as identified by Mr Roberts. My view/impression is that:

(a) similar to my views and impressions set out in paragraph 153 above; and

(b) the Accloud Revenue Sharing Agreement seems to have been examined less than the other two topics.

[106]See paragraph 55 above.

[107]See paragraph 56 above.

Even if the Plaintiffs already have a wealth of information, as the Examinee submits, although I do not necessarily accept that this is a correct characterisation, I do not think that the inference should be drawn that the resumed examination has an improper purpose. Accordingly, I do not think that this case falls within the principles from Sent v Andrews which the Examinee relies upon.[108]

Whether the resumed examination concerns matters which are the subject of other proceedings, such that it should not be allowed

[108]See paragraph 76 above.

Several cases have considered the use of s 596B examinations in the context of possible litigation which the corporation may wish to pursue. In Grosvenor Hill (Qld) Pty Ltd v Barber,[109] the Full Court of the Federal Court stated the following:

In accordance with the settled course of authority, to which we will refer below, information with respect to the probability or otherwise of success in litigation contemplated by the corporation would be information with respect to the “examinable affairs” of the corporation in question. This information would be “relevant”, that is to say, it would bear upon or be connected with, the question whether the corporation possessed a cause of action, that is, a chose in action, as its property.
…
The necessity to obtain relevant information in relation to litigation by or against a company being wound up is but one instance of the broad general purposes identified in the decisions cited above and numerous other decisions to like effect. Clearly, one purpose of an examination in relation to pending or contemplated litigation is to determine whether or not there is evidence available to support a claim brought by the company to recover property or damages, or conversely to defend a claim brought against the company, and the strength of that evidence.[110]

[109]Grosvenor Hill.

[110]Ibid, 266-268.

I see no reason why this would not also apply for s 596A examinations.

I also accept the Plaintiffs’ submission that the purpose of an examination, as referred to in Grosvenor Hill and cited above, of determining whether or not there is evidence to support a claim or defend a claim and the strength of that evidence applies not just to pending or contemplated litigation but to litigation that is already on foot. So much is clear, as the Plaintiffs submit, from Lamb v Mentha.

The Examinee’s submissions seem to be based on a premise that if the content of the resumed examination includes matters which are the subject of other existing proceedings then the examination is not permitted. The Examinee’s submissions seem to suggest that in such an instance, the purpose of the examination must be to obtain a forensic advantage and that the predominant purpose of the examination is not a legitimate one.

I do not accept this proposition. Just because the examination may involve the subject matter of existing proceedings does not mean that the liquidators’ purpose in conducting the examination is improper or an abuse of process. It depends on the circumstances, the nature of the information sought, and the precise questions asked. It is not necessarily possible or desirable for the precise questions to be laid out in advance or approved in advance by the Court. Rather, it may be appropriate to do as Goldberg J did in Lamb v Mentha and set out the general topics which could be examined, or it may be appropriate to deal with specific questions as they are asked in the examination.

I accept the Plaintiffs’ submissions that the aspects of the transactions for the Paymate India Shares and the Accloud Revenue Sharing Agreement which they wish to examine on are not the precise subject matter of the BVI Proceeding. I also accept the Plaintiffs’ submission that even if there is an overlap between the subject matter of the resumed examination and the BVI Proceeding, that does not prohibit the examination being resumed or mean that it is not justified.

The emphasis of the Examinee’s submissions was on the BVI Proceeding. Having reviewed all of the materials and given what I have already said in these reasons, I accept the Plaintiffs’ submissions that the Examinee has not explained how the subject matter for the resumed examination would impact upon or play a role in the BVI Proceeding, and that even if he had, it would not necessarily be a barrier to the resumed examination.

As the Plaintiffs point out, Mr Mawhinney will have his counsel present at the examination and any objections to particular questions can be made and dealt with as they arise. This is sufficient protection for Mr Mawhinney.

The Liven Shares are not the subject of any existing proceeding. That the Liven Shares have been the subject of demands made on Mr Mawhinney by the Plaintiffs is not a barrier to him being examined on this topic. That the Plaintiffs have foreshadowed that they may commence or intend to commence proceedings in relation to the Liven Shares is also no barrier to them being the subject matter of the resumed examination.

There is no suggestion that the resumed examination is to cover the subject of the Accloud Shares Proceeding or the Convertible Note Proceeding.

Whether the Plaintiffs’ predominant purpose in resuming the examination is to obtain a forensic advantage or another impermissible purpose

The Plaintiffs have gone on affidavit as to the purpose of the resumed examination, a factor which was not present in ASIC v Karl Suleman Enterprises, and the Examinee’s attacks on that affidavit have not persuaded me that I should not accept Mr MacKinnon’s evidence in the Current MacKinnon Affidavit and the Further MacKinnon Affidavit. Consistent with my reasons for denying the Access Application, I have not had regard to the Confidential Affidavits when considering the Plaintiffs’ evidence as to the purposes of the resumed examination.

The Plaintiffs have identified their purpose as gaining more information about the matters set out in paragraph 47 above. They are, as Goldberg J found in Lamb v Mentha, seeking to fill in gaps in their knowledge.[111]
[111]Lamb v Mentha, [30].

I do not accept the Examinee’s submissions that the Plaintiffs’ predominant purpose in resuming the examination is to gain an impermissible forensic advantage, to place pressure on Mr Mawhinney to settle the various proceedings, or to cause him to run up costs. I accept that the Plaintiffs’ predominant purpose is as deposed to by Mr MacKinnon and summarised at paragraph 47 above.

Even if an examination on the matters referred to in paragraph 47 above may have the consequence of assisting the Plaintiffs to evaluate the strength of the case against them in the BVI Proceeding, to the extent that the precise aspects of the transactions to be examined do overlap with that proceeding, such a result does not mean that the examination is an abuse of process. Even if that may be a subsidiary or collateral purpose, it is not an improper purpose and, more importantly, it is not the predominant purpose.[112]
[112]Ibid, [30].

While the Examinee’s submissions were very detailed, with extensive reference to authorities, when it came to applying those authorities to the circumstances of this case the submissions did not go beyond general assertions or propositions that this case fell within those identified as being an abuse of process. There were no particular instances or examples given of how examining Mr Mawhinney on the matters set out in paragraph 47 above would be an abuse of process. Rather, the Examinee’s submissions boiled down to the simple proposition that because he had been examined on these topics before and because they were the subject matter of existing or foreshadowed proceedings then the inference was, and must be, that the Plaintiffs’ purpose in conducting the resumed examination was an improper one.

As already said, I do not accept this.

Conclusion

Accordingly, I would dismiss the Application.

The resumed examination will go ahead. Mr Mawhinney was represented for part of his previous examinations and it is fair to apprehend that he will be represented for the resumed examination, in light of the conduct of his interlocutory process. Mr Mawhinney has previously objected to questions put to him during the examination process and I am confident that he is capable of continuing to do so, and he will also have the assistance of very able counsel. In addition, the Court is conscious of its role in terms of presiding over the examination and being alive to and cognisant of its ongoing supervisory role in preventing an examination from being an abuse of process.

The parties are requested to confer as to a form of orders to give effect to this ruling. Consent orders are to be provided to my Chambers by 2.00 pm on 16 December 2021 and if consent is not reached, then each party should forward their proposed orders to my Chambers by that same date. Either way, the proceeding will be listed for 17 December 2021 at 10.30 am or so soon thereafter as the business of the Court allows for the making of orders.

SCHEDULE OF COMPANIES

S ECI 2020 02990
IPO WEALTH HOLDINGS NO 2 PTY LTD (ACN 620 610 157) (In Provisional Liquidation)	First Company
IPO WEALTH HOLDINGS NO 3 PTY LTD (ACN 620 706 498) (In Provisional Liquidation)	Second Company
IPO WEALTH HOLDINGS NO 4 PTY LTD (ACN 622 727 280) (In Provisional Liquidation)	Third Company
IPO WEALTH HOLDINGS NO 5 PTY LTD (ACN 623 564 189) (In Provisional Liquidation)	Fourth Company
IPO WEALTH HOLDINGS NO 6 PTY LTD (ACN 623 278 955) (In Provisional Liquidation)	Fifth Company
IPO WEALTH HOLDINGS NO 7 PTY LTD (ACN 623 565 837) (In Provisional Liquidation)	Sixth Company
IPO WEALTH HOLDINGS NO 8 PTY LTD (ACN 623 559 615) (In Provisional Liquidation)	Seventh Company
IPO WEALTH HOLDINGS NO 9 PTY LTD (ACN 623 588 330) (In Provisional Liquidation)	Eighth Company
IPO WEALTH HOLDINGS NO 10 PTY LTD (ACN 628 118 374) (In Provisional Liquidation)	Ninth Company
IPO WEALTH HOLDINGS NO 11 PTY LTD (ACN 628 479 729) (In Provisional Liquidation)	Tenth Company
IPO WEALTH HOLDINGS NO 12 PTY LTD (ACN 627 184 865) (In Provisional Liquidation)	Eleventh Company
IPO WEALTH HOLDINGS NO 13 PTY LTD (ACN 624 523 039) (In Provisional Liquidation)	Twelfth Company
IPO WEALTH HOLDINGS NO 14 PTY LTD (ACN 628 480 231) (In Provisional Liquidation)	Thirteenth Company
IPO WEALTH HOLDINGS NO 15 PTY LTD (ACN 625 814 324) (In Provisional Liquidation)	Fourteenth Company
IPO WEALTH HOLDINGS NO 16 PTY LTD (ACN 625 620 760) (In Provisional Liquidation)	Fifteenth Company
IPO WEALTH HOLDINGS NO 17 PTY LTD (ACN 628 672 284) (In Provisional Liquidation)	Sixteenth Company
IPO WEALTH HOLDINGS PTY LTD (ACN 618 585 792) (In Provisional Liquidation)	Seventeenth Company

[2021] VSC 821

13 December 2021