Re: Italo-Australian Centre - [1999] QSC 54

IN THE SUPREME COURT
OF QUEENSLAND

No 2358 of 1999

Brisbane
Before Mr Justice W C Lee
[Re: Italo-Australian Centre]
IN THE MATTER of The Corporations Law

- and -

IN THE MATTER of Italo-Australian Centre (ACN 009 805 841) (subject to Deed of Company Arrangement)

REASONS FOR JUDGMENT - LEE J

Judgment delivered 22 March 1999

CATCHWORDS: CORPORATIONS - company subject to deed of company arrangement - public examination of former directors - whether power of administrator under s.597 limited by the deed - whether deed circumscribes statutory powers - whether administrator limited to questions concerning matters which gives him an immediate right to sue on behalf of the company - whether questions may be asked about insolvent trading, preferences and possible offences - whether examinees entitled to advance notice of topics to be questioned - directions as to conduct of the examination.

Corporations Law ss.596A, 596B, 596D, 596F, 597, 588FF, 588M(2), 588FE, 438D.
Cases referred to:
Simionato and Farrugia v Macks and Macks (1996) 19 ACSR 34;
Re Brash Holdings Ltd (1995) 13 ACLC 285;
Flanders v Beatty & Anor (1995) 13 ACLC 529;
Mortimer v Brown (1970) 122 CLR 493;
Hamilton v Oades (1988-9) 166 CLR 486.

Counsel:S Couper QC for applicants
I Perkins for respondent/administrator

Solicitors:McGillivrays for applicants
Hopgood and Ganim for respondent/administrator

Hearing date: 18 March 1999

IN THE SUPREME COURT
OF QUEENSLAND

No 2358 of 1999
IN THE MATTER of The Corporations Law

- and -

IN THE MATTER of Italo-Australian Centre (ACN 009 805 841) (subject to Deed of Company Arrangement)

REASONS FOR JUDGMENT - LEE J

Judgment delivered 22 March 1999

An urgent decision is necessary on this late application because it bears upon the proposed conduct, pursuant to s.597 of the Corporations Law, of a public examination next Wednesday 24 March 1999 by the administrator appointed pursuant to a deed of company arrangement of the above company, Italo-Australian Centre. Why this application was brought in this file, rather than in file 9528/97, which is the whole court file relating to the administration of the company since 22 October 1997, escapes comprehension. That file included the order made 18 January 1999 requiring the three applicants (and others) to attend and be examined. Not only would it have saved a filing fee of $171.70 for the new originating summons, it would more importantly mean that the court has before it the whole file, so important in company matters as I have repeatedly stated over the years. It would also avoid a proliferation of court files.
The application, heard on 18 March 1999, is brought pursuant to s.596F(1)(a) of the Corporations Law by three former directors of the company for orders that the administrator, David Lewis Clout, limit the matters to be enquired into at the examination of the three applicants to those matters within the scope of cl. 9.2 of the deed of company arrangement, being those matters which give the company in its present form the immediate right…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re: Italo-Australian Centre

Details

AGLC: Re: Italo-Australian Centre [1999] QSC 54
Case: [1999] QSC 54
Decision Date: 22 March 1999

CaseChat Overview and Summary

The case of Re: Italo-Australian Centre involves a dispute over the powers and scope of an administrator appointed under a deed of company arrangement. The matter was heard in the Supreme Court, where several applicants sought to challenge the administrator's actions and the scope of the investigation they were to undertake. The applicants were concerned about the administrator's authority to conduct a public examination and the requirement to produce specific documents prior to the examination. The applicants argued that the administrator could only conduct the examination for proper purposes and within the scope of their duties under the deed.

The primary legal issue before the court was whether the administrator had the authority to conduct a public examination under the deed of company arrangement and, if so, what the scope of that authority was. The applicants contended that the administrator could only exercise their powers for proper purposes and in accordance with the terms of the deed. They argued that the requirement to produce documents prior to the examination was outside the scope of the administrator's powers and that they were not adequately informed of the matters they would be examined on. The administrator, on the other hand, argued that they had the necessary authority to conduct the examination and that the requirement to produce documents was a valid exercise of their powers.

The court considered the terms of the deed of company arrangement and relevant statutory provisions, as well as the precedent set by the decision in Flanders v Beatty. The court found that the administrator did have the authority to conduct a public examination under the deed, but that this authority was limited to the performance of their duties under the deed and not for any extraneous purposes. The court also noted that the requirement to produce documents prior to the examination was not in accordance with the terms of the deed or relevant statutory provisions, and that the administrator's summons in this regard was incorrect. The court ordered that the books be produced by the following day, and that the examinees be informed of the matters they would be examined on at least 48 hours prior to the examination.

In summary, the court found that the administrator had the authority to conduct a public examination under the deed of company arrangement, but that this authority was limited to the performance of their duties under the deed and not for any extraneous purposes. The court also found that the requirement to produce documents prior to the examination was not in accordance with the terms of the deed or relevant statutory provisions, and ordered that the books be produced by the following day. The court further ordered that the examinees be informed of the matters they would be examined on at least 48 hours prior to the examination.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

An order is also sought (wrongly expressed to be pursuant to s.447E of the Corporations Law) that the administrator inform each of the applicants in writing not less than 48 hours prior to the date of the examination of each of them of the matters about which they are to be examined. It was said by Mr S. Couper QC who appeared for the applicants, that this was for the purpose of ensuring that the questions were within the scope of the administrator’s powers. However, on my drawing attention to the fact that in any public examination, prior notice of the scope of the examination is rarely given for the simple reason that at times it may defeat or affect the purpose of the examination. This is well settled. See for example, Simionato and Farrugia v Macks and Macks (1996) 19 ACSR 34 per Lander J. at 62-63. Mr Couper did not then press for this order. In any event, at any examination, the examinees have the right to be represented by counsel or solicitor, so that their rights can be protected. See for example s.597(16). A further order is sought declaring void, as contrary to s.596D(2), the requirement and the summons issued pursuant to s.596D that each applicant produce to the Registrar of the Magistrates Court certain documents before 10 March 1999. That subsection only compels an examinee to produce specified books at the examination, although Rule 79(2) of the Companies Rules provides that the court may order that books be delivered the day before. Reference was made to Re Brash Holdings Ltd (1995) 13 ACLC 285. The 10th of March 1999 was long past when the matter came before me on 18 March 1999. As indicated, the examination is fixed for next Wednesday 24 March 1999. Mr Perkins of counsel, for the administrator, conceded that the summons was incorrect in this regard and asked that the books be produced by tomorrow, Tuesday 23 March 1999. This was not opposed by Mr Couper and both parties indicated that they would cooperate to have delivery of those books as soon as possible. As Mr Clout stated in his affidavit, the precise scope of his examination cannot be fully known until those books are examined by him. This leaves the main issue viz the scope and effect of cl. 9.2 of the Deed of Company Arrangement which is Exhibit “JM2” to the affidavit of John Ian McGaw filed 12 March 1999. It provides as follows:-“Upon receipt into Hopgood and Ganim’s Trust Account of the sum of $25,000.00 referred to in clause 9.1, the Administrator shall conduct an investigation into the Business and affairs of the Company to determine, inter alia, whether any person has breached any provision of the Law or other obligation or duty owed to the Company for which the Company may be entitled to seek compensation.” (Emphasis added)The words underlined were the crux of Mr Couper’s submissions. In essence, he submitted that an administrator of a deed of company arrangement may only conduct a s.597 public examination for proper purposes and that it must be in the performance of the administrator’s duty under the deed. In this regard he referred to the decision of the Appeal Division of the Supreme Court of Victoria in Flanders v Beatty & Anor (1995) 13 ACLC 529, and in particular to the judgment of Ormiston J. with whom Tadgell J. and Harper J. agreed at 539 column 1. That passage is as follows:-“However, as to the extent of the powers of administrators of deeds of company arrangement to seek examination of examinable officers there can be no doubt. They have not only been added to the limited list of persons who may seek examination but they have also been added in circumstances where they have a right to obtain the issue of a summons for examination almost as of course under s.596A, without the need to satisfy the tests laid down in s. 596B(1)(b), except in the circumstances and for the purposes there defined. Consequently the power given to such administrators is confined only by the need to show that they are acting in the performance of their duties under the deed and not for any extraneous purpose.” (Emphasis added)