Re Pan Pharmaceuticals Ltd

[2003] NSWSC 1204

Reported Decision: (2004) 22 ACLC 52

Supreme Court

CITATION:	Re Pan Pharmaceuticals Ltd [2003] NSWSC 1204
HEARING DATE(S):	10/12/03
JUDGMENT DATE:	11 December 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Direction against publication refused
CATCHWORDS:	CORPORATIONS - winding up - public examination of officers - application for direction precluding publication of certain questions and answers - whether grounds exist - whether direction may be made before questions asked and answered
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Friedrich v Herald & Weekly Times Ltd [1990] VR 995 Re Harris Scarfe Holdings Ltd [2001] SASC 283 Jagelman v Sheahan (as liq of Moage Ltd) (2002) 41 ACSR 487 Lamb v Fixler (1994) 13 ACSR 447
PARTIES :	Anthony Gregory McGrath and Christopher John Honey as Liquidators
FILE NUMBER(S):	SC 5579/03
COUNSEL:	Mr P M Wood/Mr H W D Stowe - Liquidators Mr R J Weber SC - Mr James Selim
SOLICITORS:	Blake Dawson Waldron - Liquidators Aitken McLachlan Thorpe - Mr James Selim

THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

BARRETT J

THURSDAY 11 DECEMBER 2003

5579/03 - IN THE MATTER OF PAN PHARMACEUTICALS LTD

JUDGMENT

1 The applicant, Mr Selim, had been the managing director of Pan Pharmaceuticals Ltd for some time before it became subject to a form of creditors voluntary winding up that arises as a sequel to voluntary administration. An examination of Mr Selim under Pt 5.9 of the Corporations Act 2001 (Cth) is currently in progress before Acting Senior Deputy Registrar Wearne.

2 In the course of the examination yesterday Mr Wood, counsel for the liquidators, made it known to Mr Weber SC, counsel for Mr Selim, that he intended to embark upon a particular line of questioning. Mr Wood had already asked Mr Selim some questions about two notices of assessment issued to him by the Commissioner of Taxation, but without identifying any figures in them. Mr Wood indicated that he intended next to identify the sum shown in each such notice as Mr Selim's amended taxable income and to ask questions about the ways in which the income thus identified had been expended and applied. The two documents are at pages 203 and 204 of a bundle entitled "Financial Documents Volume 1" that is before the Acting Senior Deputy Registrar.

3 With that indication having been given, Mr Weber approached me as the Equity Division Duty Judge seeking a direction under s.596F(1)(f) of the Corporations Act prohibiting publication and communication of both the questions foreshadowed by Mr Wood and such answers to them as Mr Selim might give, making it clear, however, that any such direction should not be in terms that would inhibit the liquidators in using the questions and answers in the due and proper exercise of their functions and discharge of their duties. The main concern is, as I understand it, that the questions and answers should be shielded from media coverage. Mr Wood indicated that the liquidators’ attitude to that application was essentially neutral, assuming that the qualification on any direction was sufficient in the liquidator's eyes to enable them to perform their tasks in a fully comprehensive way.

4 Mr Wood also indicated that he had it in mind to ask similar questions, that is questions identifying a particular sum of money and inquiring into the ways the money had been applied, with respect to the content of a further document, being the document at page 271 of the “Financial Documents Volume 1” bundle.

5 Mr Weber emphasised that the application is not an application for an order that the examination continue in private, that being an order that under s.597(4) can only be made if the court considers that "special circumstances" make it "desirable” that the examination be in private. Section 596F(1)(f) by contrast contains no guidance as to the matters the court is to take into account in deciding whether to prohibit publication or communication of information, including questions asked and answers given.

6 Mr Weber accepted that, as is made clear by the decision in Re Harris Scarfe Holdings Ltd [2001] SASC 283, it is for his client to make a positive case for the imposition of the restrictions sought. Mr Weber submitted that the matter must be approached by reference to the policy underlying Pt 5.9 as a whole. He referred, in that connection, to the decision of the Full Court of the Supreme Court of Victoria in Friedrich v Herald & Weekly Times Ltd [1990] VR 995. It was there said that there were two important public purposes in the structure of analogous predecessor provisions. First, to enable a liquidator to gather information concerning the winding up of a company, including, no doubt, by pursuing recovery possibilities against officers; and, second, to enable evidence and information to be obtained in relation to the bringing of charges.

7 Dealing then specifically with the task of a court asked to make an order prohibiting publication or communication of questions and answers, the Full Court said:

“Whatever head of jurisdiction be invoked, an order cannot be justified unless it be shown that the particular question and answer or even, arguably, some particular line of questioning will, if published, result in prejudice of a kind which outweighs the need for publicity which the legislature sees as forming an essential element of the purposes of examinations under s.541.”

The essential element of publicity referred to is the element that comes from the core requirement that an examination be in public unless the court otherwise orders because of special circumstances.

8 Mr Weber said that he was not aware of any case in which a direction under s.596F(1)(f) had been made. My own brief research overnight has not found any either. One can, however, imagine circumstances in which a direction might be made. An examination might, for example, take place at a time when a criminal trial is in progress or imminent and there are apprehensions that publicity about the examination will be prejudicial from the point of view of its possible effect on jurors. This in fact was the concern that prompted the Friedrich case. Another possibility is that answers given in an examination might be scandalous in the sense that applies to the striking out of material in affidavits pursuant to Part 38 rule 8 of the Supreme Court Rules. In both these cases – and I am sure there are others – the interests of justice may require the suppression of part of the proceedings in an examination.

9 In the present case, and applying the approach indicated in Friedrich, I must consider the prejudice that the applicant will suffer if a suppression order is not made. The submissions made on his behalf really identified two matters, one specifically and the other somewhat indirectly and by implication.

10 The first is, in essence, that every individual's financial affairs, and in particular their tax affairs, are of an inherently private nature and should be shielded from publicity. Tax returns are, after all, lodged and dealt with in circumstances of statutory confidentiality so far as the public servants whose duties lie in that field are concerned. The submission is to the effect that the interests of justice are not advanced by the publication of such private and personal matters. The second matter which, as I say, was not directly raised but which I discern to be implicit in what was submitted is that media attention to the particular information may be selective and even distorted in a way that is unfair to the examinee. I hasten to say that that particular formulation is mine and was not put by Mr Weber.

11 The first matter is not, in my view, one that can be said to be militate against the free availability of the information. I accept that individuals' tax and financial affairs are normally private. But I am here dealing with a statutory context that expressly contemplates examination of company officers and requires the examination to be in public. It does so moreover in circumstances where the financial resources (and capacity to pay) of officers against whom a liquidator may, in the fullness of time, seek to institute proceedings designed to enhance return to creditors is an accepted and central element of the subject matter legitimately to be investigated. That, to my mind, is sufficient to justify the conclusion that negation of the personal privacy that would generally prevail is simply part and parcel of the due effectuation of the statutory purpose. Something more would have to be shown to warrant a finding of outweighing prejudice to which reference was made in the Friedrich case. I am fortified in these conclusions by the observation of Jenkinson J in Lamb v Fixler (1994) 13 ACSR 447 to the effect that exploration of individuals' private financial affairs did not amount to “special circumstances” for the purposes of s.597(4), the parallel being both real and legitimate.

12 As to the second matter, I adhere to the view I expressed in Jagelman v Sheahan (as liq of Moage Ltd) (2002) 41 ACSR 487, a case in which examination in private was sought, that publicity of such examinations is a normal and ordinary circumstance. Here, as there, there is no evidence to suggest that the examinee will be subjected to prejudice by way of misrepresentation or distortion if that normal and ordinary circumstance pertains. I would add to that something said in Friedrich as follows:

“Nothing in Hamilton v Oades , or in any other authority, certainly none cited to this court, suggests that unfair and inaccurate reporting can be a basis for a general order prohibiting publication of all proceedings on a public examination. It is conceivable that in relation to a particular line of questioning a high risk of inaccurate reporting may be taken into account in restraining the publication of that specific material, but it is unnecessary to reach any conclusion on that hypothetical issue.”

Nothing indicating any such high risk has been suggested here.

13 For all these reasons I do not consider that a case has been made out by the applicant for the making, by the court, of a direction of the kind sought. No such direction will be made.

14 I should refer, in conclusion, to one matter that was referred to by Windeyer J when application was made to him on 1 December (that is, before the current examination began) for a non-publication order in respect of all questions asked and all answers given in Mr Selim's then imminent examination. His Honour refused that application and in the course of doing so said:

“I have some doubt as to whether a direction can be given under s596F(1)(f) until the questions and answers are given; in other words, I am doubtful whether such an order can be made on a prospective basis. My doubt is brought about because s596F(2) seems to assume that the examination has been held.”

15 It is true that, in a passage I have quoted, the court in Friedrich recognised the possibility of a non-publication direction in advance of questions being asked and answers given. But under the present legislation the doubt expressed by Windeyer J as to whether that is a permissible course under s.596F(1)(f) is well placed. This is because of the clarificatory statement in s.596F(2) that a direction under any of certain paragraphs of s.596F(1), including paragraph (f), may be made "even if the examination was held in public". The words "was held" need to be emphasised. Those words in the past tense raise the strong possibility that directions are only intended to be made after the event. There was no counterpart provision in s.451 of the Companies (Victoria) Code, the provision considered in Friedrich's case. In view of my conclusions on the matters of substance it is not necessary for me to pursue this aspect.

16 As I have already said, the direction sought by Mr Selim will not be made.

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Last Modified: 12/16/2003