Re: Southern Equities Corporation Ltd (in Liq): Delores Caboche v Richard England No. Scgrg-93-92516 Judgment No. 6285 Number of Pages 22 Corporations
[1997] SASC 6285
•1 August 1997
IN THE SUPREME COURT OF SOUTH AUSTRALIA
DEBELLE, J
Corporations - companies - winding up - conduct and incidents of liquidation - examination by liquidator - application to set aside orders for examination - whether order for examination was an abuse of process - improper purpose - whether applicant entitled to examine confidential affidavits - whether full disclosure - appeal dismissed. Corporations Law 596A;596B;596C(1),(2);597(14A), referred to. Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWLR 582; Re Spedley Securities Ltd (1990) 8 ACLC 673; Joye v Beach Petroleum NL (1996) 1137 ALR 506; Re Rothwells Ltd (No 2) (1989) 7 ACLC
576; Hamilton v Oades (1989) 166 CLR 486; Re Excel Finance Ltd, Worthley v England (1994) 52 FCR 69; Grosvenor Hill (Q) Pty Ltd v Barber (1994) 48 FCR
301; Re Gold Company (1879) 12 Ch.D.77; Re Stirling Henry Ltd (1972) 1 NSWLR
497; Geroff v Thomas (unreported, Court Of Appeal Queensland, 14 October 1994) ; Re Imperial Continental Water Corporation (1886) 38 Ch.D. 314; Riddock v Thames Board Mills Ltd [1977] QB 881; Harman v Secretary of State for Home Department [1983] AC 280; US Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766; Sentry Corporation v Peat Marwick Mitchell (1990) 24 FCR 463, applied. The Duke Group v Pilmer (1993) 60 SASR
29, not followed.
ADELAIDE, 4,14, 29 and 30 July (hearing), 1 August 1997 (decision)
#DATE 1:8:1997
#ADD 4:9:1997
Appellant
Counsel: Mr I Callinan QC with Mr A. Harris & Mr J Cudmore
Solicitors: Ward and Partners
Respondent
Counsel: Mr R Whitington QC with Mr M. Hoffman
Solicitors: Fisher Jefferies
Order: appeal dismissed.
DEBELLE J
This is an appeal from an order of a Master refusing to set aside an order made pursuant to s596B of the Corporations Law for Ms Delores Caboche to attend before this court for examination by the liquidator of Southern Equities Corporation Ltd ("SECL"). The appeal deals with similar issues to those raised in an application by Mr Alan Bond to set aside orders made for his examination by the liquidator of SECL. Immediately before publishing these reasons, I published my reasons for dismissing Mr Bond's application. I hereafter refer to those reasons as "the Bond judgment" and, where indicated, incorporate portions of the Bond judgment in these reasons.
The facts leading to this application are as follows:
1. The liquidator of SECL has been conducting a series of examinations of former officers of SECL and other persons who have taken part or been concerned in the examinable affairs of SECL. SECL was formerly called "Bond Corporation Holdings Ltd". Mr Alan Bond was chairman of directors and executive director of Bond Corporation Holdings Ltd before the financial crash of that company and other companies in the Bond group.
2. Between 1989 and 1990 Ms Caboche was employed as the financial controller and company secretary of Dallhold Investments Pty Ltd, which was a private company owned and controlled by Mr Alan Bond. Dallhold Investments Pty Ltd was the holding company of SECL, holding slightly more than half of the issued shares in SECL. Ms Caboche is at present an employee of companies controlled by members of the family of Mr Alan Bond. Ms Caboche resides in Perth, Western Australia.
3. On 7 December 1995 the liquidator of SECL applied for orders pursuant to s596B of the Corporations Law that Ms Caboche and others attend before this court for examination.
4. On 8 December 1995 Judge Bowen Pain, a Master of this Court, made a series of orders summoning Ms Caboche and others for examination. Ms Caboche was summoned for examination on 19 February 1996. However, the order was not served. The examination of other persons proceeded at different times in 1996.
5. On 13 February 1996, Judge Bowen Pain made an order vacating the hearing for examination of Ms Caboche on 19 February.
6. On 19 February 1996 Judge Bowen Pain made an order that Ms Caboche attend for examination on 25 March. That order too was not served.
7. On 18 March 1996 Judge Bowen Pain made the following orders:
"1. That DELORES JEAN CABOCHE of Unit 12, 16 Queens Court, Mount Lawley in the State of Western Australia be examined before the Court pursuant to Section 596B of the Corporations Law.
2. That the said DELORES JEAN CABOCHE be summoned to attend before the Court at the Supreme Court House 1 Gouger Street Adelaide on Monday the 1st day of April 1996 at 11.00am to be examined on oath in respect of the examinable affairs of the abovenamed company.
3. That the examination of DELORES JEAN CABOCHE be held in private.
4. That DELORES JEAN CABOCHE not disclose the existence of this order to any person other than their legal adviser.
5. That further consideration of this order is adjourned to the time of the said examination.
6. That any person interested be at liberty to apply within seven (7) days of the service of this order to vary or discharge the order.
7. That the costs of and incidental to this order and the examination be paid out of the assets of the company."
The order of 18 March 1996 was served on Ms Caboche on 20 March. It appears that no order was made recalling the order of 19 February. Obviously the order of 18 March overtook the order of 19 February. As the order of 19 February had not been served, Ms Caboche did not have competing obligations. Her only obligation was to attend for examination on 1 April 1996.
8. On 1 April 1996 Ms Caboche attended for examination. Mr Fraser, who appeared for Ms Caboche, applied for an adjournment of the examination on the ground that it was being conducted for an improper purpose and that an application in writing was to be made seeking orders to that effect. The application was refused. The examination proceeded. It occupied about two hours. The examination was not completed and the examination was adjourned sine die. Ms Caboche did not appeal against the order refusing the adjournment nor did she later apply to set aside the order of 18 March 1996. It will have been noticed that paragraph 6 of the order of 18 March 1996 required that an application to vary or discharge the order be made with seven days of service of the order.
9. The liquidator did not seek to resume the examination of Ms Caboche for some twelve months. The reason lies in the fact that the examination of a person alleged to have a central role in the matters the subject of the examination failed to attend for examination on three separate occasions. In the second half of 1996, that person was overseas and instituted applications in this court and in another jurisdiction to set aside the orders for examination and appealed against orders dismissing his applications. Ultimately, the examination of that person proceeded in this court on 7 to 11 April and on 18 April 1997.
10. On 24 April 1997 the liquidator applied for an order that the examination of Ms Caboche resume. Master Bowen Pain ordered that Ms Caboche attend for examination on 16 May 1997 and 2 June 1997. The relevant parts of the order reads:
"1. That the examination of DELORES JEAN CABOCHE of Unit 12, 16 Queens Court, Mount Lawley in the State of Western Australia pursuant to the Order of this Honourable court made on the 18th day of March 1996 be resumed on Friday the 16th day of May at 2.15pm at which time DELORES JEAN CABOCHE is required to attend before this court at 1 Gouger Street, Adelaide in the State of South of Australia for further examination pursuant to Section 596B of the Corporations Law and thereafter at 10.00am on Monday the 2nd day of June 1997. 2. That the resumed examination of DELORES JEAN CABOCHE be held in private. 3. That DELORES JEAN CABOCHE , Tambar Pty Ltd (ACN 008 940 538) and Hullmes Pty Ltd (ACN 009 333 911) both of Mezzanine Level, Griffin Centre, 28 The Esplanade, Perth in the State of Western Australia produce at the resumed examination of DELORES JEAN CABOCHE at 2.15pm on Friday 16 May 1997 all of the documents set out in the Schedule hereto. 4. That DELORES JEAN CABOCHE, TAMBAR PTY LTD and HULLMES PTY LTD not disclose the existence of this order to any person other than their legal advisers, such legal advisers not to disclose the existence of this order to any other person. 5. That to the extent necessary the applicant may serve this order out of the jurisdiction. 6. That any person interested be at liberty to apply within seven (7) days of the service to vary or discharge this order."
This order was served on Ms Caboche on 29 April 1997.
11. On 29 April 1997 Ms Caboche telephoned Mr Hoffmann advising that she intended travelling overseas. She asked that she be excused from attending the examination on 16 May 1997. Mr Hoffmann informed Ms Caboche that the liquidator would agree to Ms Caboche being excused from attending on 16 May 1997 provided that she produced the documents requested before 16 May 1997 and attended for examination on 2 June 1997. Ms Caboche agreed to that proposal.
12. On 5 May 1997 Ms Caboche was served with copies of documents in the Action No 113 of 1996. They were the summons dated 2 January 1996, the amended summons dated 2 May 1997 and the amended statement of claim dated 5 May 1997. At that time, Ms Caboche was also handed a letter from the solicitors for the liquidator stating that this court had ordered that the proceedings remain confidential until 30 May 1997. I have summarised the relevant aspects of Action No 113 of 1996 in the Bond judgment. I incorporate that summary in these reasons. The allegations in the amended statement of claim are particularised in some detail as against all defendants averring their respective participation in the allegedly fraudulent dealings. As against Ms Caboche it is alleged that by no later than 9 January 1990, Mr Alan Bond had orally informed Ms Caboche of the scheme to acquire the paintings at a gross undervalue and either directed, instructed, or caused her to arrange certain payments as alleged in the statement of claim to give effect to the scheme. It is alleged that Ms Caboche made those payments. It is also alleged that Ms Caboche was informed of other aspects of the scheme and acted in the manner alleged to effect the scheme.
13. By letter dated 5 May 1997, the solicitors for Ms Caboche, Galbally Fraser & Rolfe informed the liquidator's solicitors, Fisher Jeffries, that Ms Caboche was leaving Australia on 16 May and returning on 26 May 1997, that she would attend the examination on 2 June, and that the documents sought by the liquidator would not be produced on 16 May but would be produced to the liquidator before 2 June. The letter was in these terms:
"We refer to the previous examination of Ms Caboche and note the fresh Order requiring her to attend on the 16th May 1997 to produce documents and thereafter on the 2nd of June 1997 conclude her s.596B examination.
Our client instructs us that she departs for Canada tomorrow, the 6th of May 1997 and returns on the 26th of May 1997.
Last week our client instructs us she was ill and in hospital.
It follows from the forgoing that our client will be available for the 2nd of June but will not be in a position to provide the documentation by the 16th May. We are further instructed however that all documentation will be produced as requested to you prior to the 2nd of June and as soon after her return to Australia as practicable".
14. By letter dated 6 May 1997 Fisher Jeffries responded to the letter from Galbally Fraser & Rolfe complaining that Ms Caboche had not adhered to the agreement made on 29 April to produce the documents on 16 May. They asked that other arrangements be made to produce the documents.
15. On 6 May 1997 Ms Caboche left Australia.
16. On 7 May 1997, the period in which Ms Caboche could apply to vary or discharge the order made on 24 April 1997 expired: see paragraph 6 of that order.
17. Ms Caboche did not attend for examination before this court on 16 May 1997. The documents requested by the liquidator were not produced. However, some of the documents were produced at the examination of another witness and by that witness.
18. Ms Caboche returned to Australia on 26 May. When the examination resumed on 2 June 1997 a summons and statement of claim in Action No 113 of 1996 had been served upon Ms Caboche almost four weeks earlier.
19. On 2 June 1997 Ms Caboche attended for examination. Before the examination resumed, counsel for Ms Caboche applied to set aside the order made on 24 April 1997 on the ground that the liquidator had obtained the order for an improper purpose. It was submitted that the principal purpose of the liquidator was to advance his position as a litigant in the Action No 113 of 1996 rather than to assist the fulfilment of his duties as liquidator. The application also sought access to confidential affidavits filed in support of the application for that order. The application was almost four weeks out of time. Mr Harris, who appeared for Ms Caboche, made an oral application for an extension of time in which to make the application. The solicitors for Ms Caboche had not given prior notice of the application to the solicitors for the liquidator. The transcript of the hearing discloses that the application had been made in consequence of a conference the night before between Ms Caboche and her legal advisers.
20. Judge Bowen Pain dismissed both of the applications made by Ms Caboche. He gave brief reasons for his order:
"I am satisfied in the circumstances of this matter that the examination is a proper exercise of the liquidator's function and that the examinee is protected by the ordinary court functions. And that the court has been properly advised in relation to these matters. And therefore I dismiss the application and the examination will proceed."
A subsequent exchange with counsel confirmed that the Master was dismissing all aspects of the application. The reasons of Judge Bowen Pain do not disclose whether he ruled on the oral application for an extension of time in which to make the application to set aside the orders for examination.
21. Mr Harris then made an oral application to have the examination stayed pending an appeal. He submitted that the appeal would be rendered nugatory if the examination proceeded. The Master dismissed this application. However, when ordering that the examination should proceed he ordered that the evidence should be taken de bene esse. In the course of the examination Ms Caboche produced the balance of the documents which she had agreed to produce on 16 May.
22. On the afternoon of 2 June 1997 counsel for Ms Caboche made an oral application to Justice Millhouse seeking a stay of the examination. The examination was then continuing before Master Bowen Pain. This application was refused and there is no appeal from that order.
23. On 4 June 1997 Ms Caboche filed a Notice of Appeal from the order of Judge Bowen Pain made on 2 June 1997 dismissing her applications. The grounds of appeal assert that the Master erred in refusing to set aside the orders for examination made on 18 March 1996 and 24 April 1997 on the grounds set forth in the notice. Reference to the application made on 2 June and the transcript of the hearing discloses that Ms Caboche had not applied to set aside the order for examination made on 18 March 1996.
24. The liquidator applied for an expedited hearing of the appeal and for an order that the appeal be heard by the Full Court. The application was heard by the Chief Justice who adjourned the application. The hearing was adjourned because it appeared that Ms Caboche sought to tender evidence as to the financial position of BCPL. The Chief Justice was concerned that the Full Court might be asked to adjudicate on disputed issues of fact. The appeal was referred to me to determine whether it was fit for appeal to the Full Court or whether it should be heard and determined by a single judge. Given that I had already heard an application by Mr Alan Bond to set aside the orders for his examination by the liquidator, the parties agreed that I should hear the appeal which involved similar issues to those in Mr Bond's application. An order was therefore made by consent that the appeals be heard by me, reserving to the parties the right to appeal to the Full Court if so advised.
25. The examination of Ms Caboche is not yet completed. It has been adjourned to a date and time to be fixed.
I had almost completed these reasons when Ms Caboche made a further application. That application did not cause me to alter my reasons. I have therefore not gone back and amended these reasons. Instead, the extent to which the application touches upon these reasons is noted in the last section of these reasons headed "An Application to Amend".
Proceedings not Confidential
As will have been noticed, orders had been made that the examination be conducted in private and that Ms Caboche not disclose the fact of the examination to any person other than her legal advisers who are under a like obligation as to confidentiality. I infer that those orders were made to prevent the examinee discussing issues likely to arise in the examination and thereby assist the liquidator in the conduct of the examination. Given that the series of examinations are almost complete and that the proceedings in Action No 113 of 1996 have now been served on all defendants, the grounds on which most of those orders for confidentiality were made no longer exist. I therefore made an order that there was no confidentiality in respect of any application or any documents filed on or after 2 June 1997. It will have been noticed that it has been necessary to refer to events which occurred before 2 June 1997. I will hear the parties as to whether there is any need to preserve any orders to confidentiality in respect of Ms Caboche, save and except for the orders as to confidentiality made in respect of the affidavits filed in support of the orders made for her examination.
The Relevant Affidavits
In addition to the orders which have been made, the evidence on which this appeal was argued is contained in the following affidavits. Ms Caboche relied on the affidavits of Mr J M Cudmore sworn on 2 June 1997 and Mr G W Dart sworn on 24 June 1997. The liquidator relied on the affidavit of Mr M C J Hoffmann sworn on 2 July 1997. In addition, the parties agreed that pages 49-70 of the transcript of the hearing of the application on 2 June 1997 should be before the Court as well as pages 21-26 of the transcript of the hearing of Mr Bond's application on 25 June 1997.
The affidavits of Mr Cudmore and Mr Dart raise questions as to the financial position of BCPL and its relationship to SECL. At the outset of the hearing, Mr Callinan QC, who appeared for Ms Caboche on this appeal, said that Ms Caboche accepted the facts concerning the financial position of BCPL and its relationship to SECL as related by Mr Hoffmann in his affidavit.
An Improper Purpose?
The first ground of appeal is that the Master had erred in refusing to set aside the order for examination. It was submitted that the examination had been and was to be conducted for an improper purpose and hence would constitute an abuse of process. There were two grounds on which Mr Callinan QC, who appeared for Ms Caboche, asserted an improper purpose on the part of the liquidator. The first was that the allegations pleaded against Ms Caboche in the amended statement of claim in Action No 113 of 1996 are so serious and so detailed that the liquidator cannot sensibly be said to be gathering information. The only inference which can be drawn, he submitted, is that the examination is for the purpose of conducting a dress rehearsal of the cross-examination of Ms Caboche. Mr Callinan ackowledged that the liquidator has the capacity to seek information notwithstanding that litigation is pending but submitted that, in the particular circumstances of this case, the examination would be oppressive. He tendered a schedule showing amendments to the statement of claim which, he submitted, had been made since the examination on 1 April 1997. The amendments were, he said, so few that it established that the examination was not for the purpose of formulating a detailed statement of claim. The second improper purpose was said to lie in the fact that BCPL would take improper advantage of the information elicited in the examination.
The relevant principles as to abuse of process in this context are set out in the Bond judgment and I will not repeat them.
Even assuming it to be true, the fact that the examination of Ms Caboche on 1 April has resulted in but a few amendments to the statement of claim does not establish that the examination is for an improper purpose. It is implicit in this submission that, unless the liquidator is able to make a considerable number of amendments in consequence of the examination, the examination is for an improper purpose. That is too simplistic an attack on the liquidator's purpose. The submission fails to have regard to the several purposes for which a liquidator might conduct an examination. The liquidator is entitled to use the examination for the purpose of assessing the prospects of success and determining whether he should continue to prosecute the action: see Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWR 582 at 585; Re Spedley Securities Ltd
(1990) 8 ACLC 673 at 676; Joye v Beach Petroleum NL (1996) 137 ALR 506 at 518. The assessment of prospects of success may include ascertaining whether there are facts which support or undermine the facts as proved in the statement of claim. To that extent the liquidator is entitled to seek admissions and to test the reliability or credit of the examinee from whom the information is being obtained: Re Hugh J Roberts Pty Ltd (in liq) (supra) at 585; Re Spedley Securities Ltd (supra) at 677. The fact that the liquidator does not secure information which leads to a substantial number of amendments to the statement of claim does not, standing alone, indicate an improper purpose. The absence of amendments says nothing about the nature or quality of information which the liquidator has obtained for the purpose of assessing his prospects of success.
The fact that Action No 113 of 1996 had been commenced would, of course, cause a court to consider whether the liquidator seeks this examination for the purpose of rehearsing his cross-examination of Ms Caboche or seeking to destroy her credit. However, no evidence has been adduced on behalf of Ms Caboche to point to that conclusion. Nor is there any other fact which assists Ms Caboche. Further, the Master was able to assess the submission of improper purpose against his observations of the examination of Ms Caboche on 1 April. It is implicit in his reasons that nothing then occurred which showed that the examination was for the purpose of rehearsing the cross-examination of Ms Caboche or constituted an attempt to destroy her credit. Mr Callinan QC has not been able to point to any passage in the examination of Ms Caboche which would point to that conclusion. In addition, I have examined the transcript of the examination of 1 April. There is nothing which suggests a rehearsal of cross-examination or an attempt to destroy the credit of Ms Caboche. While it is not a conclusive test, I have not detected any evidence of hostile cross-examination. The evidence shows that Ms Caboche held a number of offices in the Bond group of companies which, in all probability, would have enabled her to obtain a good deal of information concerning the affairs of SECL and its related entities. It is probable that she would have knowledge of the matters the subject of Action No 113 of 1996. There is a good deal of territory which could be covered in an examination without in any respect rehearsing a cross-examination or seeking to destroy credit. The transcript suggests that the liquidator is doing no more than seeking information for the purpose of assessing his case. In any event, Ms Caboche is represented by counsel. The Master may hear objections to questions and, with the benefit of counsel's assistance, determine whether the examination is departing from a proper purpose and entering the area of cross-examination or an attempt to destroy credit: Re Rothwells Ltd (No 2) (1989) 7 ACLC 576.
As Mr Callinan emphasised, the court must be alert to ensure that, in striking the balance between the legitimate interests of the liquidator and the private interests of individual, the individual is not subjected to unfairness and oppression: see Hamilton v Oades (1989) 166 CLR 486; Re Rothwells Ltd (No 2) (supra) at 588; Re Excel Finance Ltd, Worthley v England
(1994) 52 FCR 69 at 90-91; Grosvenor Hill (Q) Pty Ltd v Barber (1994) 48 FCR
301 at 311. Nothing has been adduced which suggests that the Master erred in deciding not to set aside the examination on the ground that the liquidator was seeking to rehearse his cross-examination or destroy the credit of Ms Caboche.
A Wrongful Benefit to BCPL?
The other ground of the alleged improper purpose is that the examination is being conducted for the purpose of benefiting BCPL in its prosecution of the action. The financial position of BCPL and its relationship to SECL is stated in more detail in the Bond judgment. It is a wholly owned subsidiary of SECL and a debtor of SECL. BCPL is an ordinary litigant and is not in liquidation. It is, therefore, not entitled to the same advantages as a liquidator in obtaining pre-trial depositions from an intended or actual defendant. It is neither a contributory or creditor of SECL. It has, therefore, no apparent interest in the winding-up. For all of these reasons, it was said, the examination was wrongly being used to benefit BCPL. It was submitted that the examination advanced the purpose of SECL and BCPL equally so that the predominant purpose of examination was not to benefit SECL.
For the reasons expressed more fully in the Bond judgment, I hold
* that, not withstanding that BCPL will be in a position to gain information from the examination, the predominant purpose of the examination is for the benefit of SECL;
* that the interests of the liquidator and of BCPL are so closely aligned that it is proper for the liquidator to disclose to BCPL the information he gains in the examination;
* that, in any event, BCPL could lawfully gain access to the transcript of the examination by means of s597(14A) of the Corporations Law or by discovery in Action No 113 of 1996.
The learned Master was, therefore, correct in rejecting the submission that the examination was being used for an improper purpose in that it was been wrongly used to benefit BCPL.
For these reasons I would not disturb the finding of the Master that the examination is not being conducted for an improper purpose.
Examination of the Affidavits
The Master also dismissed an application by Ms Caboche for an order that she should be permitted to have access to the affidavits filed in support of the liquidator's application for the order for examination. Ms Caboche appeals from that decision.
The relevant principles are recited in the Bond judgment. I refer in particular to the observations of the Full Court of the Federal Court of Australia in Re Excel Finance Ltd, Worthley v England (supra) at 93-94. Ms Caboche must establish that she has an arguable case, to which the material is relevant, before the discretion should be exercised in her favour. She will not be permitted access to material to enable to "fish" for a case. Once it appears that the court will be unable to fairly and properly dispose of the application if this evidence is withheld, the order will, generally speaking, be made. No evidence has been led by Ms Caboche in support of her case. It is a bare allegation. Mr Callinan has failed to demonstrate that in any respect this application cannot be fairly disposed of without access to the affidavit or that Ms Caboche has an arguable case to which the affidavit material is relevant. For the reasons already given, his submissions fall far short of demonstrating any improper purpose. Ms Caboche has not discharged the onus upon her. There is, therefore, no basis upon which Ms Caboche should be entitled to have access to the affidavits. I am satisfied that the Master correctly ordered that Ms Caboche not have access to them.
The Refusal of a Stay
Ms Caboche appealed against the Master's decision refusing to grant a stay or of the adjournment of the examination on 2 June in order to enable her to appeal against his refusal to set aside the orders for her examination. The Master directed that the evidence be taken de bene esse and that there be an embargo on the transcript of the examination until this appeal had been determined. Mr Callinan contended that this was not a sufficient protection to Ms Caboche because, despite the lack of transcript, the liquidator still had the benefit of being present, through his legal representatives, at the examination. In the absence of the transcript the liquidator will not be able to make a great deal of use of the examination. However, given that I have dismissed the appeal, it is unnecessary to determine whether the Master erred in refusing a stay.
Material Non-Disclosure?
Mr Callinan QC then submitted that the liquidator had failed to make adequate disclosure of seven facts to the court before obtaining the order of 8 December 1995 and of other relevant facts before obtaining the order of 18 March 1996. He contended that the liquidator had
1. failed to inform the court in December 1995 of his settled intention to institute Action No 113 of 1996 on or before 2 January 1996; 2. failed to inform the court in December 1995 that BCPL was to be a plaintiff jointly and severally with SECL; 3. failed to inform the court in December 1995 that BCPL claimed ownership of the art works which are the subject matter of Action No 113 of 1996; 4. failed to inform the court in December 1995 that BCPL (an intended plaintiff in the substantive action) was represented by the same solicitors as those acting for the liquidator of SECL; 5. failed to inform the court in December 1995 that Mr Hoffmann was a director of BCPL; 6. failed to inform the court in December 1995 that BCPL had unsecured third party creditors (not including SECL) amounting to $334,031; 7. failed to inform the court in December 1995 that Mr Hoffmann was to be the solicitor certifying the statement of claim on behalf of each of his clients BCPL and SECL; and 8. failed to inform the court by affidavit prior to 18 March 1996 of additional matters relevant to the exercise of the discretion to order the examination of Ms Caboche.
It is possible immediately to dispose of the complaint in paragraph 8. There were no particulars of the complaint. No evidence was adduced and no submission was advanced to show a failure of the kind there alleged. I therefore have no regard to that complaint.
It is well settled that, as a general rule, examinees are not entitled to have access to the evidence before the court upon which the order for examination has been made. The principle has long existed. In Re Gold Company
(1879) 12 Ch. D. 77, at 82-84, Jessell MR expressed the principle in these terms:
"The liquidator, according to the practice of the Court, comes ex parte, and, as a general rule, he makes no affidavit, for a very good reason, that it is not desirable for him to put anything upon the files of the Court which can be inspected by the person against whom he intends to proceed, and which, if so inspected, might afford information which would enable him to defeat any proceeding to be taken against him. .... The Court acts without legal evidence, the object being to keep the proceedings secret from the person sought to be affected, and the practice is, and as far as I know always has been, that the liquidator, instead of making an affidavit, simply makes a written statement which he leaves with the Chief Clerk, who thereupon issues an order, and the written statement cannot be got at by anybody, whereas an affidavit can."
In Re Stirling Henry Ltd (in liq) [1972] 1 NSWLR 497 at 501 and 503, Street J commented on the practice in New South Wales in terms which fairly stated the practice then prevailing in this State. He referred to the observations of Jessel MR in Re Gold Company (supra) and continued:
"In this State it has been the practice for an order to be made by the Master rather than by the chief clerk. But with this exception the practice referred to by Jessel MR concerning the written statement has always been observed (at 501) .... It is, it must be conceded, an unusual procedure for a court to make an order upon material that is withheld from the person against the order is made. But, although unusual in a general sense, it is hallowed by long practice within the field of company law both in this country and in England, and it is based upon sound reasons of public interest." (at 503)
The practice has now altered. The liquidator is now required to file an affidavit in support of his application: s596C(1). However, the affidavit is not available for inspection except so far as the court orders: s596C(2). The effect of s596C(2) is to vest the court with a discretion to decide whether the affidavit should be made available for inspection with the consequence that the principle expressed in Re Gold Company (supra) is not as inflexible as hitherto. The factors relevant to the exercise of the discretion were examined by the Full Court of the Federal Court of Australia in Re Excel Finance Corporation Ltd, Worthley v England (supra) at 93 to 94. The relevant passage is recited in the Bond judgment and I incorporate it in these reasons.
Further, it appears that the court is at liberty to examine the affidavit if both parties consent. Inspection by the court does not, however, necessarily entitle the party seeking to set aside the order for examination to examine the affidavit. Although in Re Stirling Henry Ltd (in liq) (supra) Street J reaffirmed the long standing practice not to permit access to the liquidator's reason, he was prepared to examine them with the consent of both parties. In that case Street J himself had ordered the examination. The examinee applied for an order to set aside the examination seeking also an opportunity to inspect the reasons for the purpose of challenging the information placed before the court. Street J could not recall the reasons advanced by the liquidator for seeking the order. He asked the parties if he could inspect them. As neither party invited him to adopt that course, he did not do so. He expressed his reasons in these terms at 499:
"As I have already said, the order was made upon the information placed before the Court in the liquidator's reasons. I have no present recollection of the contents of those reasons. I adverted to this during the course of argument and inquired separately of the counsel of the applicant and of counsel for the liquidator if either party wished me to unseal the envelope and to reconsider the justification, upon those reasons, for having made the order of 11 April. Neither party invited me to take this course. I do not think it appropriate, in the absence of an invitation from at least one party, to undertake independently a reconsideration of those reasons."
In Geroff v Thomas (unreported 14 October 1994) the Court of Appeal in Queensland acceded to a request to inspect an affidavit over the objection of counsel for the liquidator. The court was apparently satisfied that the claim for non-disclosure was fairly based. The court inspected the affidavit. It did not disclose the contents of the affidavit other than to state that, there had been a failure to disclose an action pending in the District Court of Queensland. The court did not set aside the order for examination notwithstanding the failure to disclose the action in the District Court because it was not satisfied that the examination had not been sought for an improper purpose.
Mr Callinan QC referred to Re Stirling Henry Ltd (in liq)(supra) and invited me to examine the affidavits filed in support of the orders for the examination of Ms Caboche if I thought it necessary to do so. He accepted that, if I did so, he would not necessarily be at liberty to examine them. The Court could not, he submitted, fairly rule on the allegations of non-disclosure unless it inspected the affidavits. As might be expected, consistently with the application of Ms Caboche to inspect the affidavits, Mr Callinan's preferred position was that his client should be permitted to inspect the affidavits. Mr Whitington QC had no objection to the suggestion that I should inspect the affidavits and not disclose them to Ms Caboche.
I do not think a court should too readily yield to an application to inspect the affidavits on a bare assertion of non-disclosure. The court should scrutinise a claim for non-disclosure with great care to ensure that it is advanced on proper grounds. The court should be alert to ensure that the claim is not a pretext for gaining access to the affidavit in circumstances where the applicant has not in any respect demonstrated that he has an arguable case to have access to it or is otherwise entitled to it. However, I am prepared to act on invitation of Mr Callinan given that Mr Whitington has no objection. I have, therefore, inspected an affidavit sworn by the liquidator on 7 December 1995 which was the affidavit relied on in support of the order for examination made on 8 December. There does not appear to be any other relevant affidavit. Without breaching the orders of confidentiality made in respect of each of these affidavits, it can be said that the liquidator asserted his belief that SECL may be entitled to institute proceedings to recover any loss occasioned by the dealings in the paintings and that he seeks his examination to assess the prospects of success. The liquidator has also disclosed that BCPL is a subsidiary of SECL, that BCPL provided financial administrative services to the SECL group, and that it insured the paintings the subject of the action. The liquidator did not say that he then intended to institute Action No 113 of 1996 or that BCPL would be a party in that action.
The uncontroverted evidence is that the liquidator instituted the action in order that he would not be defeated by the expiry of periods of limitations. It is apparent that the liquidator did not then have full possession of the facts. The substantial number of amendments made to the statement of claim after examination of witnesses demonstrates that. No person was examined between the order made on 8 December 1995 and 2 January 1996 when Action No 113 of 1996 was instituted. That fact suggests that, as at 7 December 1995, the liquidator had a settled intention to institute proceedings particularly if he was concerned to avoid expiry of the relevant periods of limitation. In addition, although it has since undergone considerable amendment, the statement of claim issued on 2 January 1996 was a substantial document. It contained 85 pages and 181 paragraphs pleading the relatively complex transactions which the liquidator challenges. Given the Christmas break, it is very likely that the statement of claim had been drawn and settled earlier in December. The solicitors would not have embarked on that course without instructions from the liquidator. The submission that the liquidator had a settled intention on 7 December 1995 to commence proceedings was raised only in the course of submissions. There was no opportunity for the liquidator to adduce evidence in answer to it. Nevertheless, I find that on 7 December 1995 the liquidator intended to institute the action.
There is obviously a difference between a settled intention to issue proceedings and an intention to do so after having assessed the prospects of success. To that extent the liquidator has failed to make full disclosure. But the question is whether that failure constituted a material non-disclosure which invalidates the order. Reference has already been made to the well-settled principle that the fact that the liquidator seeks to use an examination to gather information in relation to proceedings which he intends to institute or which he is already instituted does not, standing alone, constitute an abuse of process. Further, it is also well settled that a liquidator may use the examination for the purpose of assessing the prospects of success of an action. Reference to both of these principles shows that there is in this context no material difference between stating the possibility of instituting legal proceedings after assessing the prospects of success and a firm intention to institute proceedings. For these reasons, the liquidator's clear statement that it was possible that he might institute legal proceedings did not amount to a material non-disclosure.
This reasoning accords with the views of Street J in Re Hugh J Roberts Pty Ltd (supra) at 587. In that case, Street J made the following observation when dealing with the submission that there should have been a disclosure to the court and that misfeasance proceedings were immediately imminent:
"The intention to commence such proceedings is not a matter should, under penalty of what is tantamount to impropriety, have been disclosed to the court at the time the application was made last December for the issue of summons for private examinations".
This view was followed by the Court of Appeal of Queensland in Geroff v Thomas (supra). The observations of Chitty J in Re Imperial Continental Water Corporation (1886) 33 Ch. D. 314 are often cited as support for the proposition that there must be full disclosure when seeking an order for examination. Failure to disclose the fact that the proceedings have been instituted led him to set aside the order for examination. However, it should be noted that the Court of Appeal upheld the judgment on another ground. Cotton LJ was careful to say that he did not put his judgment upholding the order in any way on the suppression of facts before the Chief Clerk to whom the application had first been made. Lindley and Lopes LJJ were of a like view.
In any event, the failure to disclose the intention to issue the proceedings was not - in the event - of any consequence. The order of 8 December was not served and before any further order for examination of Ms Caboche was served, the solicitors for the liquidator had informed the Court that the action had been issued on 2 January. In other words, because the order of 8 December was not served, the non-disclosure did not adversely affect the interests of Ms Caboche in any way. The order with which Ms Caboche had to comply was the order of 18 March 1996. That was made by the court with knowledge of the fact that the action had been instituted and notwithstanding that fact. The failure to make disclosure is not material to the question whether the liquidator is seeking to use the examination for an improper purpose nor does the failure to make disclosure affect the outcome of this appeal.
For these reasons, the fact that the liquidator intended on 7 December 1995 to commence proceedings was not a material non-disclosure.
The complaints as to the inadequate disclosure of the other facts have little to recommend them. I will deal with them by reference to the numbered paragraphs. I deal first with the complaint in paragraph 2. The liquidator's affidavit did refer to an involvement of BCPL but it did not state it was an intended plaintiff. However, the fact that BCPL was a plaintiff was disclosed by no later than 21 February 1996. Further, the fact that BCPL is a co-plaintiff has little bearing on whether the order for examination should be made. For the reasons given in the Bond judgment, BCPL will obtain little, if any, benefit from the judgment and to the extent that it might gain a benefit, the benefit will flow to SECL. For the reasons given in the Bond judgment, the failure to inform the court that BCPL is represented by the same solicitors as those acting for the liquidator (see paragraph 4) has little bearing on whether the order should be made and the facts complained of in paragraphs 5 and 7 do not amount to a material non-disclosure.
The complaint in paragraph 3 is wholly misconceived. The statement of claim alleges that the owner of the paintings is SECL and that BCPL acted as SECL's agent. The failure to state the amount due to unsecured creditors of BCPL, as alleged in sub-paragraph 6, is not material given that the principle purpose of the action is to recover damages for SECL. The benefit to BCPL is incidental and in any event that benefit will flow through to SECL.
Whether viewed singularly or as a whole, the failure to disclose these facts was not material to the making of the order on 18 March 1996, by which time the court had been informed of all of those facts save for the indebtedness of BCPL to its unsecured creditors.
Even if I were to hold the liquidator had not made proper disclosure, the question then arises whether the orders should be set aside. All of the material facts are now before the court. None of them provide any reason for setting aside the orders for examination. I have already held that there is no improper purpose if disclosure is made by the liquidator to BCPL of information obtained at the examinations and that is a further reason for not setting aside the orders for non-disclosure.
A Breach of Confidence?
Although it was not a ground of appeal, Mr Callinan submitted, without objection from Mr Whitington, that the disclosure to BCPL was in breach of the orders of confidentiality made by the court and in breach of the implied undertaking which binds a party to whom documents are produced for inspection, not to use the documents for any collateral or ulterior purpose without the leave of the court or the person from whom the documents had been obtained: Riddock v Thames Board Mills Ltd [1977] QB 881; Harman v Secretary of State for Home Department [1983] AC 280; US Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766; Sentry Corporation v Peat Marwick Mitchell (1990) 24 FCR 463. In Sentry Corporation v Peat Marwick Mitchell (at 491) the law in Australia was stated to be that a person who acquires a document pursuant to the processes of the court is under a duty not to disclose or make use of that document for purposes other than the court proceedings without the leave of the court or the person from whom the document had been obtained. That rule has been extended to documents produced in answer to a summons for examination under s596 of the Corporation Law: The Duke Group Ltd v Pilmer (1993) 60 SASR 29.
The Orders as to Confidentiality
I deal first with the question whether the disclosure to BCPL has been made in breach of the orders as to confidentiality. Mr Callinan submitted that, as the Master had ordered that the examination be conducted in private and the examinee was subject to an order not to disclose the fact of the examination, the liquidator was also under obligation of confidentiality. He could not, therefore, disclose the transcript of the examination or documents produced in the course of the examination to third parties including BCPL. In addition, he pointed to the fact that Mr Hoffmann was a director of BCPL. As Mr Hoffmann had been present at the examination or had custody of the transcript of the examination and the documents produced at the examination, he submitted that there had been a wrongful disclosure to BCPL. An examination of the order shows that there is no substance in the submission.
The orders as to confidentiality bind the examinee but do not bind the liquidator. The liquidator is at liberty to use the information and documents obtained in whatever manner he believes will assist his administration of SECL for the benefit of its creditors. For example, he is at liberty to use information or documents obtained in earlier examinations concerning the affairs of SECL when examining persons later summoned for examination. The practice of using information obtained in earlier examinations to examine persons in later examinations is commonplace when a liquidator's enquiries require the examination of more than one person. Further, to take an absurd example, the liquidator could, if he wished, make a general disclosure of the information he has obtained to later examinees and so negate whatever benefits are available to him by dint of the orders as to confidentiality. In short, the orders as to privacy and confidentiality were made to protect and enhance the liquidator's examination and to protect and enhance his capacity to get in the assets of SECL. The orders should not be used to subvert the examination of later witnesses. The orders were made for the liquidator's benefit and did not impose any obligation of confidence upon him.
An Implied Undertaking?
I have carefully examined the decision in The Duke Group Ltd v Pilmer (supra). With respect, I am unable to agree with the conclusion that documents produced to a liquidator in the course of a s596 examination cannot be used in the absence of leave from the court or the person who produced them. The purpose of the examination is to enable the liquidator to gain information which is not readily available to him. It enables the liquidator to obtain documents. Sometimes documents obtained in the course of examination turn out to be documents and records of the company which ought to have remained in the possession of the company. In those cases, the examination does no more than return the documents to the company. The rule would prevent the ordinary use by the liquidator of the company's own documents. Further, it has not been the practice to require a liquidator to seek the leave of the court or the person who produced the document to use the document in subsequent litigation. In addition, the liquidator may wish to use a document or documents which he has obtained in the examination as evidence in more than one action. The effect of the rule as expressed in The Duke Group Ltd v Pilmer would require the liquidator, on each occasion he seeks to use a document, to obtain leave from the person who produced the document or from the court. If the person who has produced the document refuses to consent to its use, it would be necessary on every occasion to obtain the leave of the court, a requirement which would not only be onerous but expensive. It would increase the costs of the liquidation to the detriment of the creditors of the company.
There is, I think, another reason for this view. Where the liquidator is a plaintiff with one or more other plaintiffs, I think he should be at liberty to disclose the document to his co-plaintiffs since the document will be disclosed in any event in the course of discovery. There is nothing in either s596 or s597 which limits the use the liquidator may make of the information and documents coming into his hands in the course of the examination. In this respect, it is relevant to note again that s597(14A) provides that any person may suspect the written record of the examination on payment of the prescribed fee. The terms of s597(14A) serve to emphasise that the process of obtaining documents in the course of an examination differs from the means of obtaining documents by other procedures.
For these reasons, I do not think that, as a general rule, documents produced to a liquidator in the course of an examination are subject to the rule that they cannot be used in later proceedings without the leave of the court or the person who produced the document. The liquidator is at liberty to use the documents gained by him for the purpose of prosecuting an action or actions in the course of his administration of the liquidation.
But, even if I follow and apply the decision in The Duke Group Ltd v Pilmer (supra), the disclosure to BCPL is not improper for the reasons already given.
An Extension of Time?
If Ms Caboche wished to apply to set aside the order of 24 April 1997, she was required to do so within 7 days: see paragraph 6 of the order. When the application was made on 2 June 1997 to set aside the order of 24 April 1997, an application was also made for an extension of time within which to make the application. It is not apparent from the brief reasons given by the Master whether he ruled on the application for an extension of time. As I read the transcript of the proceedings on 2 June 1997 the matter was overlooked. It seems that the Master decided to deal with the substantive application and, having refused it, found it unnecessary to deal with the application for an extension of time. In case the Master had refused the application, Mr Callinan QC applied to amend the notice of appeal in order to include a ground which challenged a refusal to grant the extension.
The order of 18 March 1996 had required Ms Caboche to attend for examination but had not required her to produce documents. Before the examination on 1 April 1996 her solicitor, Mr Fraser, applied for an adjournment on the ground that the examination was being conducted for an improper purpose and that an application in writing was to be made seeking orders to that effect. The application was refused. The examination proceeded and was adjourned sine die. The order made on 24 April 1997 fixed a date for resumption of the examination and also ordered that Ms Caboche produce the documents referred to in paragraph 3 of the order. Given that the Master had on 1 April 1996 refused an adjournment to enable Ms Caboche to apply to set aside the order for examination made on 18 March 1996, it is curious that the order of 24 April 1997 granted leave generally to set aside the order instead of confining the grant of leave to the orders to produce documents. Nevertheless, Ms Caboche is entitled to exercise the right granted to her. Further, the service of the summons and statement of claim in Action No 113 of 1996 was a new event which would, I think, entitle Ms Caboche to apply to set aside the order for examination even if that right had not been included in the order of 24 April 1997.
The application to set aside the order of 24 April 1997 should have been made before 7 May. Ms Caboche was absent overseas from 6 May until 26 May. The application was not made until 2 June when the examination was to resume. The transcript of the hearing shows that the decision to make the application was an eleventh hour decision made on 1 June 1996 and that the decision was grounded on the service of the summons and statement of claim in Action No 113 of 1996. At all times, Ms Caboche has had legal advisers acting for her. No explanation has been proffered for the delay in making the application other than that the summons and statement of claim in Action No 113 of 1996 were served on 5 May. If the service of those proceedings was a relevant factor, it would have been as relevant on 7 May as it was on 1 June. The fact that Ms Caboche was overseas has some weight. But there was no reason why her solicitors should not have been able to contact her to obtain instructions. The application has the appearance of an eleventh hour attempt to obstruct the examination. These time limits are imposed so that examinations are not unduly delayed. But the delay of about one month does not unduly prejudice the liquidator. For that reason and not without a great deal of hesitation do I exercise my discretion in favour of granting an extension of time in which to make the application to set aside the order. Alternatively, if in fact it is a ground of appeal, I allow the appeal against the orders refusing an extension of time.
For all of these reasons, I dismiss the appeal.
An Application to Amend
After this appeal had been heard, and when the preparation of these reasons was well advanced, Ms Caboche applied on 11 July for leave to amend her application to seek to set aside the orders for examination made on 8 December 1995, 13 February, 19 February and 18 March 1996. The application was made in consequence of the fact that the existence of those orders was only disclosed in the course of the hearing of the appeal when it became apparent that other orders concerning Ms Caboche had been made. The history of the orders has already been recited. It is apparent that the substantive order is the order made on 8 December 1995. The application was made out of an abundance of caution lest any point be taken that the order of 24 April 1997 did no more than vary an earlier order which was in fact the substantive order. Ms Caboche wished to challenge the substantive order. It was no fault of Ms Caboche that the existence of these orders had not been ascertained earlier. Nothing on the face of the order of 24 April 1997 suggested an earlier order. There was no reason to search the earlier orders. Given that this was an appeal, the application was unusual. But, having regard to the manner in which the existence of the orders came to the knowledge of Ms Caboche, I believed it appropriate to allow the application. I also allowed an extension of time in which to make the application. The power to allow the application is to be found in Rule 97.18
The application came on for hearing on 14 July. Mr Whitington then sought to tender an affidavit of Mr J D Karas sworn on 11 July 1997 in answer to the application. I ordered that the affidavit be admitted subject to an application to the contrary by Ms Caboche within 48 hours. That order was made because Mr Harris, who appeared for Ms Caboche, wished to consider his position and seek instructions in relation to the tender of the affidavit. Ms Caboche made an application within 48 hours on 16 July 1997. However, the application did not oppose the admission of the affidavit. Instead, Ms Caboche sought the following orders:
"1. That the respondent cause to be produced to the appellant for inspection by her legal advisers all correspondence, copy correspondence, attendance notes, file notes, memoranda and cost entries (together "file notes") made, caused to be made received or maintained by its solicitors, and any counsel instructed by them (on any dates and times whatsoever) of or relating to the orders made herein on 8th December 1995 19th February 1996 and 18th March 1996 whereby the appellant Delores Jean Caboche was summonsed to be examined pursuant to s596B of the Corporations Law.
2. That Jason Demetrios Karas attend for cross-examination on his affidavit dated 11 July 1997."
Because of the commitments of counsel, it was not possible to list the hearing of the application before 29 July.
The parties agreed a course of conduct which made it unnecessary to rule on the application. On a without prejudice basis, the solicitors for the liquidator handed to the solicitors for Ms Caboche copies of the only documents they believed answered the description of the documents sought in the application. The copies masked irrelevant material. In addition, the documents were made available without any waiver of legal professional privilege. The offer was accepted subject to the assurance of Mr Whitington that he had inspected the documents and the files and concluded, first, that the material which had been masked was irrelevant and, secondly, that there were no other relevant documents. Mr Whitington reserved the right to call Mr Karas to explain the documents. The application was, therefore, adjourned to 30 July. On 30 July Mr Whitington gave the assurance that the material which had been masked out was irrelevant and that, subject to one matter, there was no other relevant documents. The exception was a letter, a copy of which was handed to the solicitors for Ms Caboche. The letter did not refer to anything which was relevant to this application. Mr Whitington then tendered the affidavit of Mr Karas. Mr Harris made two objections. The first was to the relevance of an exhibit to the affidavit marked "JDK2". I ruled that the exhibit was relevant and, therefore, admissible but that its weight might be a matter for comment. The second objection related to paragraph 11 of the affidavit insofar as it purported to prove knowledge of Mr Hoffmann. I admitted paragraph 11 on the footing that it stated no more than the belief of Mr Karas of the state of knowledge of Mr Hoffmann. The state of knowledge of Mr Hoffmann could, of course, only be proved by Mr Hoffmann.
The solicitors for Ms Caboche had given notice that they wished to cross-examine Mr Karas. Mr Karas gave evidence and was cross-examined by Mr Harris. By consent, Mr Whitington was permitted to lend evidence concerning the preparation of the statement of claim in Action No 113 of 1996.
I accept the evidence of Mr Karas. The effect of his oral evidence and the evidence in his affidavit is that he is a senior associate employed by Fisher Jeffries, the solicitors for the liquidator. Since the latter part of 1994 he has been engaged in acting for the liquidator of SECL. He has assisted Mr Hoffmann in that task. The legal work associated with the winding-up has occupied the greater part of his professional time. Either on 24 December 1995 or a few days before, he had been instructed by Mr Hoffmann to draw the summons and statement of claim in what is now Action No 113 of 1996. He began that task on 24 December and continued it on every day between 26 and 31 December 1995. He worked long hours on that task. On 31 December 1995, the summons and statement of claim were ready for filing. Mr Hoffmann settled the statement of claim in the latter part of the period 26-31 December. Mr Karas said, and I accept, that Mr Hoffman asked him to prepare the statement of claim to avoid the expiry of periods of limitation.
Mr Karas also proved a file note. As part of his duties, Mr Karas is responsible for the organisation and maintenance of all files relating to the liquidator's examinations. After the liquidator had been served with the notice of appeal herein, he retrieved what he thought to be the relevant files for Mr Hoffmann to review. In the time available, he did not retrieve every file. After the liquidator had been served with the application of Ms Caboche dated 10 July 1997, Mr Hoffmann instructed him to undertake a thorough review of the contents of all of the files kept by the solicitors for the liquidator for the period 7 December 1995 to 19 February 1996 and to seek to clarify the sequence of events relating to the orders for examination of Ms Caboche. In the course of his review he located a file note concerning an attendance before Judge Bown Pain on 22 January 1996, when he had applied to vary the terms of an order for examination of a person other than Ms Caboche. The note was on a file which he had not previously reviewed for the purpose of answering the applications made by Ms Caboche. The note is contemporaneous note summarising the matters which he mentioned to Judge Bowen Pain. For present purposes, it is not necessary to refer to the contents of the whole of the note. The passage on which Mr Karas relies is item 3 on that note. It reads:
"Proceedings issued - 2/1 - Debelle J made confid order"
His note discloses that he reported on the status of a number of other matters which were at that time pending in the administration of the winding up of SECL. He adds that until he identified the note, he had no recollection of the hearing on 22 January 1996. Refreshing his memory from his note, Mr Karas says in his affidavit:
"By reference to item 3 in my note, I verily believe that I informed Judge Bowen Pain on 22 January 1996 that substantive proceedings (being Action Number 113 of 1996) had been filed on 2 January 1996 and that the Honourable Justice Debelle had made orders as to the confidentiality of those proceedings on that day. Having now thoroughly reviewed the matter, I verily believe this was the first available opportunity to disclose the existence of Action Number 113 of 1996 to the Master as the Master had been on annual leave until 22 January 1996. Upon reviewing my note and the surrounding circumstances, it is apparent to me that I took this opportunity to appraise the Master of developments in the winding up in his capacity as the Judicial Officer supervising the conduct of the winding up of SECL."
There is no reason why I should not accept the evidence of Mr Karas. Given that one of the grounds of the application by Ms Caboche to set aside these orders for examination was non-disclosure in the Action No 113 of 1996, Mr Karas would have proved that file note had he been aware of it. It is obvious that it could have materially assisted the case for the liquidator. It is apparent that, but for the note, Mr Karas would not have remembered what he told the Master on 22 January. Mr Karas has been careful to state no more than that he informed Judge Bowen Pain of the fact that the action had been commenced and that an order had been made that the proceedings be confidential. He does not state that he named the parties to the action.
Cross-examination of Mr Karas concerned these matters and, in addition, one other file note. The file notes made by Mr Karas included a note dated 21 February 1996 which, as explained by Mr Karas, reads:
"MCH Re substantive proceedings: - could extend summons - carries baggage and once AFP warrants executed, risk to painting - seek Mareva relief and Letters of Request, that UK court to make Mareva injunction and ancillary relief"
The note refers to an appearance by Mr Hoffmann and Mr Karas before Judge Bowen Pain on 21 February 1996 when further orders were sought in the examinations being conducted by the liquidator. The letters MCH refer to Mr Hoffmann and the note concerns remarks made by him to Judge Bowen Pain. The abbreviation "AFP" refers to the Australian Federal Police. Mr Karas had no recollection of the attendance independently of the note. Mr Harris did not ask any further questions concerning that note.
By consent Mr Hoffmann also gave evidence concerning the preparation of the summons and statement of claim in Action No 113 of 1996. He confirmed the evidence given by Mr Karas. He said that, at the time he gave instructions to Mr Karas to prepare the documents, he had not received instructions from the liquidator to issue the proceedings and that he received those instructions after Christmas 1995.
None of the evidence led on 30 July causes me to depart from the conclusions of fact or law that I have already made. I deal first with the findings as to whether there was a failure by the liquidator to make full disclosure in his affidavit on 7 December 1995. While I accept that the summons and statement of claim were prepared on and after 24 December 1995 and that Mr Hoffmann did not receive instructions from the liquidator until after Christmas 1995, those facts throw little further light on the intentions of the liquidator. It is the liquidator's intention which is relevant. It is to be noted that he did not give evidence. I do not, therefore, alter my finding that the liquidator intended on 7 December 1995 to issue proceedings. By the same token, there is nothing in this evidence which causes me to change my view that there was no material non-disclosure.
The evidence of Mr Karas that he informed Judge Bowen Pain on 22 January 1996 of the fact of the action adds little to the existing evidence. As, I have said, Mr Karas has been careful to state no more than that he informed the judge of the fact that the action had been commenced and that an order had been made that the proceedings be confidential. He did not name the parties to the action. He did not state that Ms Caboche was a defendant. He did not mention that BCPL was a plaintiff. The first full disclosure of these matters was made by Mr Hoffmann on 21 February 1996. I nevertheless adhere to my early conclusions that there was no material non-disclosure.
At the conclusion of his submissions, Mr Harris introduced an entirely new topic. He submitted that the file note of 21 February 1996 gave rise to a real concern on the part of those advising Ms Caboche that one of the purposes of the liquidator in conducting the examination was to provide information to the Australian Federal Police. He was careful to point out that he was not asserting that the liquidator did in fact have that purpose. Instead, he sought an adjournment to enable those advising Ms Caboche to investigate the matter.
This is not the first occasion on which Ms Caboche had submitted that one of the liquidator's purposes in conducting the examination was to assist the Australian Federal Police. As already mentioned, before the examination of Ms Caboche on 1 April 1996, her solicitor, Mr Fraser, had applied for an adjournment so that Ms Caboche could apply to set aside the order for examination on the ground that it was been conducted for an improper purpose. He then said that he was relying on an argument submitted on behalf of Mr Craig Bond on Friday 29 March 1996 that one of the purposes of the examination was to assist the Federal Police. That application had been made in the course of the examination of Mr Craig Bond. It was submitted that the questions then being asked also related to the subject of a warrant issued by the Federal Police. Mr Craig Bond's application was dismissed. On 1 April 1996 Mr Fraser advanced the same argument on behalf of Ms Caboche. The application for the adjournment was dismissed and the examination proceeded. Ms Caboche did not appeal against the order dismissing her application nor did she seek to renew the application or make a fresh application. When she applied on 2 June 1997 to set aside the order for examination, Ms Caboche did not allege that one of the purposes of the examination was to assist the Federal Police.
It must be acknowledged that there are occasions when new evidence will justify the renewal of an application. But in this case Mr Harris had about 24 hours in which to obtain instructions on the file note. Given that Ms Caboche had already sought to set aside the examination on 1 April 1996 on the ground that the liquidator's purpose was, among other things, to assist the Federal Police, it is reasonable to infer that the note would have immediately excited the attention of her solicitors who would then have instructed Mr Harris. It is, therefore, a matter for note that Mr Harris has failed to cross-examine Mr Karas to seek to elicit some facts which might assist the application for the adjournment. He did not ask what the note signified, or what was meant by the reference to execution of warrants by the Australian Federal Police, or whether he had any knowledge of dealings between the liquidator and the Federal Police, or why it was necessary to mention the matter to Judge Bowen Pain. There were a number of questions which Mr Harris could have asked if he wished to seek to establish either an improper purpose on the part of the liquidator or a ground for the application for an adjournment. Given that Mr Karas had already given evidence that he had been involved in the administration of liquidation since 1994, it would have been apparent to Mr Harris that Mr Karas might have been able to throw some light on the implications of that note.
Further, I think it is drawing a very long bow to suggest that the note indicates that one of the purposes of the liquidator in conducting the examination is to assist the Federal Police. On the face of the note, it suggests no more than that Mr Hoffmann is expressing a concern as to a possible outcome if the warrants are executed. There is nothing which relates to Ms Caboche.
For these reasons, I refuse the application by Ms Caboche for an adjournment which, by reason of the facts I have just mentioned, has all the hallmarks of an eleventh hour attempt to delay and obstruct the examination.
In short, nothing which has been adduced on this application causes me to alter the conclusions I had earlier reached.
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