Re Qintex Group Management Services Pty Ltd (in liq)

[1996] QCA 464

IN THE COURT OF APPEAL	[1996] QCA 464
SUPREME COURT OF QUEENSLAND
Brisbane

Appeal No. 7057 of 1996

[Adler & Anor v. Qintex]

BETWEEN:

RODNEY STEPHEN ADLER

(First Applicant) First Appellant

AND:

FAI GENERAL INSURANCE COMPANY LIMITED

(A.C.N. 000 327 855)

(Second Applicant) Second Appellant

AND:

QINTEX GROUP MANAGEMENT SERVICES PTY LTD

(In Liquidation) (ACN 010 656 694)

(Respondent) Respondent

Appeal No.7063 of 1996

[Putland v. Qintex]

BETWEEN:

GEOFFREY WILLIAM PUTLAND

(Applicant) Appellant

AND:

QINTEX GROUP MANAGEMENTS SERVICES PTY LTD

(In Liquidation) (ACN 010 656 694)

(Respondent) Respondent

McPherson J.A.
Pincus J.A.

Derrington J.

Judgment delivered 22 November 1996

Judgment of the Court.
APPEALS DISMISSED WITH COSTS.

CATCHWORDS	CORPORATIONS LAW - Liquidation - Examination of Officers - Whether providing liquidator with tactical advantage not otherwise available under ordinary pre-trial procedures - Whether unjust or oppressive - Section 596B of the Corporations Law.
Counsel:	Mr I.D.F. Callinan Q.C., with him Mr J.C. Sheahan, for the first appellant Mr P.R. Dutney Q.C., with him Mr J. Lee for the second appellant Mr P.A. Keane Q.C., with him Mr. A.P.F. Ryan for the respondent
Solicitors:	Minter Ellison for the first appellant Robertson O’Gorman for the second appellant Middletons Moore & Bevins for the respondent
Hearing Date:	4 November 1996.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane

Before McPherson J.A.
Pincus J.A.
Derrington J.

Appeal No. 7057 of 1996

[Adler & Anor v. Qintex]

BETWEEN:

RODNEY STEPHEN ADLER

(First Applicant) First Appellant

AND:

FAI GENERAL INSURANCE COMPANY LIMITED

(A.C.N. 000 327 855)

(Second Applicant) Second Appellant

AND:

QINTEX GROUP MANAGEMENT SERVICES PTY LTD

(In Liquidation) (A.C.N. 010 656 694)

(Respondent) Respondent

Appeal No.7063 of 1996

[Putland v. Qintex]

BETWEEN:

GEOFFREY WILLIAM PUTLAND

(Applicant) Appellant

AND:

QINTEX GROUP MANAGEMENTS SERVICES PTY LTD

(In Liquidation) (ACN 010 656 694)

(Respondent) Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 22 November 1996

Qintex Group Management Services Pty. Ltd. (“QGMS”) is a company that in October 1990

was ordered to be wound up. Messrs Geroff and Burns, who are respondents to these appeals, were

appointed liquidators. On 26 August 1996 they obtained from Fryberg J. an order or orders under

ss.596A and 596B of the Corporations Law that a summons issue to the appellants R.S. Adler and

G.W. Putland to attend at court to be examined about the affairs of QGMS. At relevant times

Mr Putland had been a director of QGMS. Mr Adler was a director of FAI General Insurance

Company Limited which, as its name suggests, conducted an insurance business. It or associated

companies held shares in Qintex Limited and in a related corporation, and were creditors for substantial

sums owing by companies in the group. Mr Adler was included in the order as a person who, under

s.596B, “may be able to give information about examinable affairs” of the company in liquidation.

Investigations of the affairs of the company revealed that in February and March 1989, QGMS

had paid to FAI sums totalling $5 million. The payments affected to be made as premiums for policies

of insurance issued to QGMS by FAI. The liquidators formed the opinion that there was reason to

doubt the genuineness of those policies or the validity of the payments, and on 17 February 1995 they

instituted proceedings by action in the Supreme Court to recover the amount paid and interest. A

statement of claim was delivered in March 1996; it was followed by a defence denying the claims; and,

between that date and this, various interlocutory steps (including discovery of documents) have taken

place in the action.

At the hearing an affidavit by Mr Burns was read in support of the application for examination.

In para.18 of the affidavit Mr Burns said he wished to publicly examine certain persons (the appellants

being two of those named) so that he would be in a better position to assess the prospects of QGMS

in the Supreme Court proceedings, and also to obtain from them evidence that would be admissible at the trial. In cross-examination at the hearing, Mr Burns confirmed that this was his intention, and that

the main focus of his inquiries was discussions that had taken place about the insurance policies between

the appellant Adler and a Mr Christopher Skase. At the time, Mr Skase was a director of QGMS and

may be described as the principal of the Qintex group of companies.

In giving reasons for granting the orders, Fryberg J. found that the primary purpose of the

proposed examination was to enable the liquidators to obtain detailed information about the

communications between Adler and Skase. His Honour went on to hold that that purpose was a proper

purpose, and that it was not oppressive to require Mr Adler to be examined as proposed.

On behalf of the appellant Adler, Mr Callinan Q.C. challenged the decision on two grounds.

He submitted that examination should not be ordered where a liquidator was, by that means, seeking

to achieve an advantage not otherwise available under ordinary pre-trial procedures, and, further, that,

in the circumstances of the case, it was unjust or oppressive to require his client to be examined. On

one view of it, the first submission raises a matter of law. The second does not, which means that, as

to it, the appellant has the task of persuading this Court that in making the order the discretion of the

primary judge miscarried in some identifiable way.

The two submissions tend to overlap, but it is convenient to begin with the second of them. The

matters specifically relied on before this Court were delay in commencing the action and in serving the

writ; that the liquidators had reserved the right to seek leave to administer interrogatories in the action;

that discovery having taken place in the action, the order now required production of documents at the

examination; that an examination in Brisbane would be more expensive and inconvenient for Mr Adler,

who lives in Sydney, than the process of answering interrogatories; that it was difficult to prevent the

examination being used as a dress-rehearsal for cross-examination at the trial; that at trial Mr Adler would again be exposed to examination about the same matters, which had in any event already been

the subject of examination before an inspector some years before the liquidators’ application was made;

and, finally, that both an open and a “without prejudice” offer to settle the action had already been made

by the appellant.

Unless we were prepared to say that one of those offers must be accepted, it is difficult to

appreciate the relevance of the last of these considerations. The liquidators have throughout acted on

legal advice. Neither the advice nor the terms of the offers are before us; and, even if they were, it

would only be in exceptional circumstances that the Court would presume to direct a liquidator as an

officer of court to disregard advice received from an apparently competent source.

The earlier examination of Mr Adler requires a little more explanation. In 1990 the Australian

Securities Commission, or its predecessor, conducted an investigation, in the course of which Mr Adler

was examined, into one or more of the Qintex companies. Books and records exhibited at the hearing

and a taped copy of the evidence taken in the examination have been made available to the liquidators

by the Commission, but only on conditions limiting publication that might make them difficult to use it

as evidence at the trial of the action. The examination did, it seems, concern itself with the question now

in issue in the action, but, according to evidence of Mr Burns before Fryberg J., it did not do so either

“correctly or fully”. His Honour concluded that the liquidators were “entitled to satisfy themselves on

this question”. The evidence obtained in 1990 is not before us, and without reviewing it ourselves it

would be impossible to form a different view of the matter even if we were entitled and disposed to do

so. The further consideration that it will be inconvenient and expensive for Mr Adler to attend in

Brisbane to be examined again is, for present purposes, sufficiently answered by saying that it appears

to be a consequence of carrying on a business that reaches beyond the place where Mr Adler lives.

The other specific matters relied on by the appellant are subsumed in the more general

complaint that, in examining Mr Adler as proposed, the liquidators will gain an advantage not available

to ordinary litigants. It is of course possible to locate decisions in which weight has been given to such

a consideration as tending against ordering examination. Re Westmix Ltd. (1993) 13 A.C.L.C. 1070,

at 1080-1081, on which reliance was placed, may afford an instance of that kind, although the decision

in that case has now been reversed by the Court of Appeal of New South Wales: Sherlock v.

Permanent Trustee Australia Limited (18 Oct. 1996). However, it does not follow that, because

a procedure for oral examinations or depositions is not generally available to litigants in Australia,

liquidators should be prevented from using it for the purpose of litigation: Re Excel Finance

Corporation Ltd. (1994) 52 F.C.R. 69, at 91. The legislation gives a liquidator rights not possessed

by other litigants: Hamilton v. Oades (1989) 166 C.L.R. 486, at 497. In the nature of things,

liquidators when they are appointed labour under the particular disability of not knowing as much about

the affairs of the company as former directors and others, and that they often cannot obtain reliable

information about suspicious transactions. Generally, the only source available to them is the records

of the company such as books and documents, if still available, and the information they contain is

always vulnerable to contrived explanations and even to distortion by persons not anxious to disclose

what they really know about events that took place when they were in charge of the company’s affairs.

A plaintiff in civil proceedings is bound to prove his case and generally must do so by oral evidence.

Directors and senior officers of the company in liquidation, even if they have not absconded, are often

unwilling and unco-operative witnesses especially in matters in which they are the target of proceedings

brought by the liquidator. Few other litigants suffer to that disadvantage, or to the same extent, as

liquidators.

Compulsory examination is capable of providing evidence in the form of admissions (Douglas-

Brown v. Furzer (1994) 11 W.A.R. 400, at 408), which may succeed in establishing a case at trial

calling for an answer from the defendant. It was precisely because of the notorious defects of the old

Chancery bill (of which interrogatories at one time formed a part) that early companies legislation

provided the summary and simpler alternative procedure by misfeasance summons in the liquidation

(Cavendish Bentinck v. Fenn (1887) 12 App.CA. 652, at 660) coupled with a power to conduct an

oral examination on oath instead of administering interrogatories. To deny to liquidators the use of the

procedure for examination in litigation would deprive it of most of its practical utility. Interrogatories are

rarely as effective. In Queensland, under O.35, they may now be delivered only by leave of the court,

and ordinarily must not exceed 30 in number. Fryberg J. was certainly correct in saying that

interrogatories are a clumsy way of ascertaining information of the kind that is sought here.

For all that, there may be some cases in which it can be seen that liquidators are acting

improperly in seeking to examine someone under the provisions of the Corporations Law. Examinations

under the statute are capable of being or becoming oppressive if their real purpose is simply to exert

pressure by inflicting costs, or causing undue inconvenience or embarrassment to the defendant. There

may also be other ways in which they can operate harshly. Conducting a dress-rehearsal of cross-

examination may conceivably be another instance, although in practice it probably serves mainly to alert

a witness to the questions he may expect to be asked at trial and so enable him to anticipate them.

Interrogatories tend to have that effect, which is one reason why they seldom achieve their object. The

fact that an application to examine is made long after the relevant events took place may be a matter for

consideration; but it is a regrettable feature of many windings up that, like litigation, they often take an

inordinately long time to complete. There is nothing to suggest that the liquidators here deliberately deferred the application to examine the appellants in order to catch them off their guard. Mr Adler has

not sworn to any prejudice by reason of delay, and the bare fact that time has passed is not enough to

supply that omission.

On behalf of Mr Putland, Mr Dutney Q.C. relied on the submissions advanced on behalf of Mr

Adler in his appeal. The only other matter specifically mentioned was that the liquidators had not shown

that Mr Putland knows anything about the critical conversations between Mr Skase and Mr Adler. It

appears, however, that it was he who exercised responsibility for the insurance requirements of QGMS;

and it may possibly be useful to the liquidators to have evidence in the action showing that at the time

in question Mr Putland knew nothing at all about matters which, on the face of it, appear to involve

insurance transactions of some magnitude.

The primary judge is not shown to have been wrong in making the orders appealed against.

In each matter the appeal should be dismissed with costs.