Sandhurst Trustees Ltd v Harvey - [2004] SASC 157

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
SANDHURST TRUSTEES LIMITED v HARVEY & ORS
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Perry and The Honourable Justice Bleby)
8 June 2004
CORPORATIONS - SUPERVISION, REGULATION AND CORRECTION - EXAMINATIONS - SCOPE OF EXAMINATION
Appeal from a decision of a Master - the respondents where subject of orders for examination and production of documents - orders were made at the request of the appellant, trustee for noteholders - Master made orders setting aside orders for examination and production of documents - whether cause of action maintained by the appellant sufficient to support orders for examination - whether examination orders where supportable under s 596B of the Corporations Act - whether the terms of the trust deed preclude the appellant from applying for examination orders - appeal allowed - application made by the respondents setting aside examination orders dismissed.
Corporations Act 2001 (Cth) Div.1 Part 5.9, s 596A, s 596B, s 596B(1)(b), s 597(4), s 597(13), s 597(14A), s 588M(3); Corporations Law Division 4 Part 7.12, s 1052, s 1054; Corporations Law s 1056, s 1056(1)(d), s 1056(1)(e), s 1056(1)(f), s 1056(6), s 1056(6)(a), s 1057; Fair Trading Act 1987 (SA), referred to.
Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512; Worthley v England; Worthley v Australian Securities Commission (1994) 52 FCR 69; Flanders v Beatty (1995) 15 ACSR 324; Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 582; Hamilton v Oades (1989) 166 CLR 486; Douglas-Brown v Furzer (1994) 13 ACSR 184; New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610; New Cap Reinsurance Corporation Holdings Limited and the Corporations Law [2001] NSWSC 835, discussed.
Re GPI Leisure Corporation Ltd (In liq) (1994) 53 FCR 365; Re Italo-Australian Centre (1999) 30 ACSR 388, considered.

SANDHURST TRUSTEES LIMITED v HARVEY & ORS
[2004] SASC 157
FULL COURT: Doyle CJ, Perry and Bleby JJ

DOYLE CJ On 23 June 2003 orders were made under s 596B of the Corporations Act 2001, on application by Sandhurst Trustees Ltd (“Sandhurst”) for the examination of Ms Flower and Mr Harvey, and for the production by them of certain documents. Ms Flower and Mr Harvey are employees or members of the firm Deloitte Touche Tohmatsu (“Deloitte”), a firm of chartered accountants and auditors. An order was also made that Deloitte produce certain documents. For convenience, I will refer to Ms Flower, Mr Harvey and Deloitte as the examinees. The orders made were for their examination in respect of the examinable affairs of Normans Wines Limited (Receivers and Managers appointed) (in Liquidation) (“Normans”).
The examinees applied for an order setting aside those orders.
A Master made that order, on the grounds that Sandhurst was not authorised by the provisions of a trust deed, under which it acted, to apply for examination orders, or by implication, to proceed with the examination.
Sandhurst has appealed against that decision.
The appeal raises questions as to the scope of the court’s power under s 596B of the Corporations Act to order an examination, and as to the application of that provision in the particular circumstances of the case. I defer a more precise statement of the issues until I have outlined the circumstances of the case.
Facts
Normans was a wine maker and bottler of wine. Deloitte was its auditor.
In 1999 Normans proposed to invite members of the public to subscribe for convertible unsecured notes, and to issue a prospectus in connection with that invitation. By s 1052 of the Corporations Law that meant that Normans had to appoint a trustee for holders of those notes, pursuant to a trust deed that met the requirements of s 1054 of the Corporations Law. The duties of such a trustee are set out in s 1056 of the Corporations Law. Putting it very generally, the duties of the trustee are to protect the interests of debenture holders. In the present case, that meant the interests of persons who subscribed for the unsecured convertible notes.
Normans entered into a deed with Sandhurst, described as a “Convertible Note Trust Deed” (“the deed”). The deed was made on 1 July 1999. It is intended to satisfy the requirements of the Corporations Law. The deed provides that Normans may issue convertible notes in accordance with and subject to the deed from time to time: clause 3.1.
Normans offered convertible unsecured notes to the public on 5 August 1999, accompanied by a prospectus dated 12 July 1999. Members of the public subscribed for the notes, paying $12 million in all.
Normans went into liquidation in 2001. There appears to be no prospect of the note holders recovering all of the money owed to them. The noteholders represent about 40 per cent by value of Normans’ creditors.
In September 2002 Sandhurst instituted proceedings in this court against Deloitte. Sandhurst filed a detailed Statement of Claim. The proceedings have not yet been served on Deloitte. The proceedings were issued to avoid the expiry of a limitation period. The Statement of Claim is lengthy. I will do my best to summarise it. Sandhurst alleges that Normans engaged Deloitte to audit Normans’ accounts, to audit financial statements and reports required of Normans under the deed, and to express an opinion for the purposes of the prospectus referred to above as to whether anything had come to Deloitte’s attention that would indicate that any events subsequent to the most recent financial report were not properly disclosed in the draft prospectus, and whether anything had come to Deloitte’s attention that would indicate that Normans did not have “adequate forecast cash flows” to meet its interest obligations. Sandhurst alleges that Deloitte owed a duty of care to Sandhurst, as trustee of the deed, because Deloitte knew that as trustee Sandhurst would have to and would rely on Deloittes in the performance of Deloitte’s audit function, and in the provision of the reports and opinions referred to. Then Sandhurst alleges that due to errors and omissions and failures by Deloitte, there were errors in the audited accounts, and that Deloitte was in breach of its duties by providing unqualified audit opinions and by failing to report matters that required comment in relation to the prospectus, with the result that the prospectus was misleading. Sandhurst alleges that in consequence of Deloitte’s breaches of engagement and in consequence of Deloitte’s breach of duty, Sandhurst “did not take steps to prevent the issue of the convertible unsecured notes.” Sandhurst also alleges that for the same reasons it did not exercise its powers under the deed, without stating what it would have done had the breaches of duty not occurred. It alleges that in consequence of those breaches, “Sandhurst and thereby the noteholders have suffered loss and damage being the entirety of the funds subscribed for the convertible unsecured note issue being $12,000,000.00”.
The claim for relief warrants specific mention. Sandhurst claims a declaration that the conduct of Deloitte was misleading or deceptive or likely to mislead or deceive, a declaration that as a consequence Sandhurst has suffered loss or damage, and a declaration that Sandhurst is entitled to compensation. There is a separate claim for damages under the Fair Trading Act 1987 (SA) and (presumably) at common law. The loss claimed is the money subscribed for the notes.
On 18 June 2003 the Australian Securities and Investment Commission authorised Sandhurst to make application under Division 1 of Part 5.9 of the Corporations Act in relation to Normans. Section 596B is in this Division.
On 23 June 2003, on application by Sandhurst, the orders for examination referred to above were made. On 26 June 2003 the examinees applied for an order setting aside the examination orders, which orders the Master made.
The Master’s reasons
The Master rejected a submission that Sandhurst had no power under the deed to prosecute the action against Deloitte. The submission was that the action was not something authorised by the deed. It seemed to be accepted that if that submission succeeded, there was no basis for the examination orders. The Master said it was reasonably arguable that Sandhurst had authority under the deed to prosecute the action, and that that sufficed.
On the other hand, the Master accepted a submission that the deed did not authorise Sandhurst to apply for the examination and production orders. The Master said that clause 8.2 and clause 8.4 of the deed governed the situation. Clause 8.2.1 specified action that could be taken by Sandhurst upon “an event of default”. The winding up of Normans was an event of default. Neither in clause 8.2 nor in clause 8.4 was there any reference to the obtaining of an examination order. As to that the Master said:
“[23] Mr Whitington likened the position of the trustee pursuant to the provisions of the trust deed to that of an agent. I think that comparison is apposite to this aspect of the applicants’ case. The trustee, as agent for the noteholders, is limited to the authority conferred upon it as agent and if, by the trust deed, it is not authorised to take proceedings for examination and production orders, once that becomes known to the Court, the examination and production orders should be set aside.
[24] For these reasons, I consider that the applications of the applicants for orders setting aside the examination orders and summonses and the orders for production of documents should be granted.”
The Master rejected a submission that Sandhurst had been guilty of material non-disclosure in its application for the examination orders, and that for that reason the examinees should not have access to the affidavits filed by Sandhurst on the application. The Master also rejected a submission that the orders were arguably made for an improper purpose. The improper purpose was said to be promoting or advancing the action by Sandhurst against Deloittes. The Master said:
“[33] ….it may be said that if an examination conducted by a creditor advances the position of the creditor by a legitimate means in relation to proceedings which have been brought or are contemplated by the creditor (which, if successful, has the prospect of bettering the position of the creditors and contributories of the company), such a purpose is not an improper purpose.
[34] In my view, that is the situation in this case. If Sandhurst’s proceedings are successful against Deloitte, the noteholders will be paid out to the extent of the recovery by Sandhurst. That would clearly benefit the other creditors. The fact that there is a possibility that Deloitte might claim to be subrogated to the position of the noteholders and lodge a proof of debt accordingly may detract from the overall benefit to the company, its creditors and contributories, but that does not, in my view, preclude Sandhurst from conducting examinations because the position is somewhat hypothetical. In any event, there is the potential for those creditors who are noteholders to recover more than any dividend that the liquidator may be able to pay.”
Each of these matters was argued on appeal.
Submissions on appeal
The examination order was made under s 596B of the Corporations Act. Unlike an examination order under s 596A, such an order is not made as of course. Section 596A provides as follows:
“596A    The Court is to summon a person for examination about a corporation’s examinable affairs if:
(a)   an eligible applicant applies for the summons; and
(b)   the Court is satisfied that the person is an examinable officer of the corporation or was such an officer during or after the 2 years ending…..”
on a day specified in subsequent sub-clauses of the provision. Section 596B provides as follows:
“596B (1) The Court may summon a person for examination about a corporation’s examinable affairs if:
(a) an eligible applicant applies for the summons; and
(b) the Court is satisfied that the person:
(i)   has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or
(ii)   may be able to give information about examinable affairs of the corporation.
(2) This section has effect subject to section 596A.”
The definition of “eligible applicant” is to be found in s 9, and is as follows:
“eligible applicant, in relation to a corporation, means:
(a)     ASIC; or
(b)     a liquidator or provisional liquidator of the corporation; or
(c)     an administrator of the corporation; or
(d)an administrator of a deed of company arrangement executed by the corporation; or
(e)a person authorised in writing by ASIC to make:
(i) applications under the Division of Part 5.9 in which the expression occurs; or
(ii)    such an application in relation to the corporation.”
The definition of “examinable affairs of a corporation” is also to be found in s 9, and is as follows:
“examinable affairs, in relation to a corporation means:
(a)the promotion, formation, management, administration or winding up of the corporation; or
(b)any other affairs of the corporation (including anything that is included in the corporation’s affairs because of section 53); or
(c)the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation’s examinable affairs because of paragraph (a) or (b).”
Section 597 contains a number of provisions relating to the conduct of examinations. Of particular relevance are sub-sections (4), (13) and (14A), which provide as follows:
“(4)   An examination is to be held in public except to such extent (if any) as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private.
(13)The Court may order the questions put to a person and the answers given by him or her at an examination to be recorded in writing and may require him or her to sign that written record.
(14A) A written record made under subsection (13):
(a)   is to be open for inspection, without fee, by:
(i)     the person who applied for the examination; or
(ii)   an officer of the corporation; or
(iii) a creditor of the corporation; and
(b)   is to be open for inspection by anyone else on paying the prescribed fee.”
The central issue on appeal is the scope of the discretion conferred by s 596B, and whether in this case there are circumstances capable of enlivening, and providing a basis for the exercise of, the discretion. A further issue is whether the deed is capable of depriving Sandhurst of the power to apply for the orders, if the circumstances would otherwise provide a basis for the making of the order, and whether the deed actually deprives Sandhurst of the power.
Mr O’Bryan SC, counsel for Sandhurst on appeal, submitted that the circumstances of the case did enliven the power under s 596B. He argued that Sandhurst was discharging its function as trustee under the deed in gathering information about a possible breach of duty by Deloitte in relation to the subscription by the noteholders for the notes. He argued that the deed did not preclude Sandhurst from performing this function, and could not do so if it purported to do so, the function being sourced from the Corporations Act.
He submitted further that it was appropriate for Sandhurst to enquire whether the noteholders had a remedy against Deloitte in respect of the loss of the money subscribed, and in particular to collect information to assist it in deciding whether the action should be continued, reshaped or abandoned.
Mr Wells QC, counsel for the examinees, submitted that the Master should have found in their favour on each of the matters argued before him.
Mr Wells submitted that the causes of action relied on or advanced in the action against Deloitte were causes of action that are not trust property for the purposes of the deed, and in any event are not reasonably arguable. Accordingly, as the action was plainly not maintainable, it could not provide a basis for the making of the examination orders.
His second submission was that even if Sandhurst had an arguable cause of action, the power conferred by s 596B is not able to be exercised for the sole or predominant purpose of assisting a single creditor or class of creditors (the noteholders or Sandhurst, if Sandhurst in fact had suffered a loss), there being (according to the submission) no benefit to the corporation with which Deloitte dealt or whose examinable affairs were the subject of enquiry (Normans), and no benefit to its contributories or creditors generally. He submitted that an examination order made simply to advance the interest of a particular creditor or class of creditors was made for a purpose foreign to the power conferred by s 596B.
His third submission was that in any event the deed did not authorise Sandhurst to apply for the examination orders.
He further submitted that it was arguable that material matters were not disclosed by Sandhurst when it obtained the examination orders, and that for this reason, or because it was arguable that the statutory power was being used for an improper purpose, the examinees should have been given access to the affidavits filed in support of Sandhurst’s application, before the Master decided whether the examination order should be set aside for non disclosure or as an abuse of the statutory power.
The power to make the orders
I begin with some general observations about the scope of the discretion conferred by s 596B.
The power to make such orders has a lengthy history. The history has been referred to in a number of decisions. I refer in particular to Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, to Worthley v Australian Securities Commission (1994) 52 FCR 69 and to Flanders v Beatty (1995) 15 ACSR 324 for an outline of that history.
As I mentioned earlier, an order under s 596A is made as of course, but must be for the purpose of an examination about a corporation’s examinable affairs. The court has a discretion under s 596B, and presumably the discretion is conferred because under this provision a person may be summoned for examination even though the person is not an examinable officer of the corporation. The object for which the power in s 596B is conferred is indicated, in my opinion, by the provisions found is subsection (1)(b).
The statutory provisions as they now stand are wider in their reach than their predecessors. The nature of the recent changes in these provisions is conveniently summarised by Ormiston J, with whom the other members of the Full Court of the Supreme Court of Victoria agreed, in Flanders at 331-332 as follows:
“…Undoubtedly the scheme for compulsory examination forms, and has for over 150 years formed, part of the law relating to companies and, now, “corporations”. What originally was a means for obtaining information in the course of a liquidation as to a company’s affairs by means of a private examination was expanded over the years, as a response to notorious company frauds in the 1890s and 1960s, by giving similar powers in a variety of circumstances to seek examinations, usually held in public, as to the conduct of officers and others suspected of fraud, breach of trust and other misconduct: see the examination by this court of the history of the relevant sections up to and including the merged provisions of s541 of the Companies Code in Friedrich v Heraldand Weekly Times Ltd [1990] VR 995, esp at p999-p1004.
In the short period since that decision, the provisions relating to examinations have been twice re-stated, though in relation to s597 of the Law in its original form almost all of what was said by the court in Friedrich’s case, and by the High Court in Hamilton v Oades (1989) 166 CLR 486; 85 ALR 1, still remained applicable. However, what remains of s597 and what is contained in the new s596A to s596F and s597A and s597B, as amended and inserted (respectively) by the Corporate Law Reform Act 1992, has radically altered the scope of, and procedure relating to, examinations, albeit that the subject matter of an examination is little altered so far as the company itself is concerned. In the first place, the range of possible applicants has been extended. Secondly, the new definition of “examinable affairs” includes the “affairs” of the corporation but has now been extended to cover the “business affairs” of “connected entities”, although the definition of “affairs” in s53 is barely altered and in fact was and is little different from the definition contained in s6 of the Code.
Thirdly, it may be said that the principal change effected by these amended provisions is that an “eligible applicant” now may obtain as of right an order for the issue of a summons for the examination of any “examinable officer” (widely defined) of a corporation who is shown to have held office within two years of the commencement of the administration or winding-up: s596A. Alternatively, in respect of any other person (or any examinable officer who held office before the two year period), the court is given a discretion, expressed in not dissimilar terms to that given by the former s597(2), to order that such a summons for examination do issue if satisfied that the person has been or may have been guilty of “misconduct” (defined to include fraud, negligence and breach of duty) in relation to a corporation or otherwise may be able to give information about the “examinable affairs” of a corporation: s596B.”
As I have just observed, in my opinion the purpose for which the power is conferred is indicated by the provisions of s 596B(1)(b), although indicated only in general terms. In a loose sense, the purpose can be said to be the gathering of information about the matters referred to in subclauses (i) and (ii).

The earlier provisions and the current provisions have been considered in numerous cases. It is not necessary to canvass the whole body of case law, but it is helpful to make reference to some observations that have been made as to the purposes for which the power to order examinations is conferred on the court.
In each case it is necessary to be mindful of the particular context in which the observation was made, and to be mindful also of the later changes in the legislation.
In Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 582 at 585; (1970) 91 WN (NSW) 537 at 540, Street J said:
“The liquidator is given by the statute this special authority to proceed by way of private examination to obtain information which he needs for the due winding up of the company, the affairs of which he has the responsibility of administering. The mere fact that in obtaining that information he also obtains admissions or material that are available for him to use in evidence in current proceedings falls short of rendering the process abusive, vexatious or oppressive.”
And at 541 he added:
“A liquidator needs information concerning his company just as much in connection with current or contemplated litigation as in connection with other aspects of its affairs. In using the statutory machinery of private examination he will in many cases be gathering evidence as an ordinary and legitimate use of this procedure.”
In Hamilton v Oades (1989) 166 CLR 486 at 496 Mason CJ said:
“There are the two important public purposes that the examination is designed to serve. One is to enable the liquidator to gather information which will assist him in the winding up; that involves protecting the interests of creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connexion with the company’s affairs.”
In Hong Kong Bank Gleeson CJ at 521 made the following observation in relation to the purpose for which the power (then to be found in s 597) was conferred:
“As appears from its place in the legislative scheme, and from its terms, whilst s 597 has an important role to play in relation to companies that are being wound up, and liquidators or provisional liquidators will be amongst those who most commonly take advantage of its provisions, the operation of the section is by no means confined to liquidators. The statutory context of “external administration”, in which s 597 has its place, throws light on the purposes for which the power to order examinations (or to authorise persons to apply for examination orders) is conferred. Those purposes include the protection of shareholders and creditors and of interested members of the public. They are not, however, confined to the need for such protection in the case of winding up. Winding up is only one form of external administration. The scope of s 597 is wider.”
In Douglas-Brown v Furzer (1994) 13 ACSR 184 the Full Court of the Supreme Court of Western Australia considered the provisions as they now stand. The Court was concerned with the question of access to transcript of an examination ordered on the application of a liquidator. The examinee had obtained an order the intent of which was to protect it against a creditor of the company in liquidation having access to the transcript. The creditor had commenced an action against the examinee and his employer. On appeal the Court set aside that part of the order that would have denied the creditor access to transcript of the relevant part of the examination.
In the circumstances, it was clear that the liquidator had obtained the examination order to advance the liquidation of the company, because the liquidator was investigating the possible recovery of alleged preferential payments: Malcolm CJ at 190. In that context, Malcolm CJ said at 191:
“In my opinion, when one reads subss 597(14) and (14A) in the context of the provisions as they now appear, the patent object is to enable the liquidator or any creditor of the corporation to have access to the written record or authenticated transcript of an examination and use it in evidence in any proceedings against the person being examined. Taking all the provisions together, the intention of the legislation appears to be that such examination should now be carried out in such a way which will facilitate not only investigations but also the prosecution of civil or criminal proceedings, whether contemplated or already commenced, including civil proceedings by individual creditors. The intention is that the persons who are eligible applicants and any other relevant persons are given a forensic advantage which the court can prevent being abused by its control over the conduct of the examination.”
New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 also dealt with the provisions as they now stand. Mr Burton was an officer of a company to which a receiver and manager had been appointed. New Zealand Steel (Australia) Pty Ltd. (“NZS”) obtained an order under s 596B for his examination about the examinable affairs of the company. NZS was the plaintiff in proceedings in which Mr Burton and others were defendants. NZS was claiming to recover from the defendants the amount of debts incurred by the company when it allegedly traded while insolvent. NZS had been refused an order for discovery in the action, on the grounds that the discovery of documents by Mr Burton and the other defendants might incriminate them: at 618. Mr Burton applied for an order setting aside the examination order, or adjourning the examination until after the hearing of the action against him. He argued that the order was a misuse of the power under s 596B, because it was made solely to enable NZS to obtain information that it could use to its advantage in the action. Hayne J accepted that NZS obtained the order to advance its own interests: at 612. As to the legislative history, Hayne J said at 616:
“It is clear then, that no longer are the examination provisions of the companies legislation to be regarded as restricted to cases in which the company has been wound up and it therefore follows that the provisions are not to be read as now limited to cases in which the examination will be for the purposes of a winding up and the benefit of those interested in that winding up.”
He said that the examination might disclose insolvent trading by the company. If insolvent trading had occurred, it was likely to have been with other creditors as well. The record of the examination would be available to the Australian Securities Commission and to other creditors of the company. The subject of the examination was of legitimate interest to persons other than NZS. He said that if the examination had been conducted by a liquidator, including a liquidator being funded by NZS, the examination would be for a proper purpose if conducted with a view to recommending criminal proceedings in respect of insolvent trading. The fact that the examination order was intended by NZS for its own purposes did not mean that the order was beyond power, or that it was one conducted merely for private purpose: at 619.
The purpose of the power was further considered by the Full Court of the Federal Court in Worthley. The case deals with the provisions as they were before being recast as s 596A and s 596B. In that case the examination order directed to Mr Worthley was made at the instance of a receiver and manager, appointed by a trustee for debenture holders. The purpose for which the order was sought was said to be to ascertain the existence of assets for the benefit of the trustee for debenture holders, but it was suggested that the purpose was in fact to advance an action instituted by the trustee and the debenture holders against Mr Worthley, a partner of a firm that had prepared audit reports in relation to the corporation in question, and against the firm. The Court, having referred to the observations of Mason CJ in Hamilton v Oades, said (at 86):
“The reference by his Honour to “liquidator” in the passage quoted reflects, of course, the facts of Hamilton v Oades itself where the examination under consideration was an examination by a liquidator. In the present case the second of the public purposes, to which Mason CJ referred, has no application. It reflects the public interest in exposing fraud and the possible existence of offences which Parker, in the article earlier cited, refers to as “fraud allegation” (see at 28). The purpose of an examination, in a case such as the present, is to gather information in relation to, inter alia, the management administration or otherwise the affairs of the corporation to determine the assets of the corporation which may be available for distribution to creditors and the location of those assets and, more particularly, to determine whether assets may be recovered by the corporation for the benefit of creditor arising out of transactions which may have involved fraud, negligence, default, breach of trust, breach of duty or other misconduct in relation to the corporation. It is what Parker refers to (at 26) as the “information examination”.”
Finally, I refer again to Flanders, which also deals with the provisions as they presently stand. In that case the examination order was obtained by an administrator under a deed of company arrangement. In relation to an administrator, and the purpose of the power, Ormiston J said at 333:
“However, the significance of granting these powers to administrators is that the object for which they ought properly to be used should comprehend anything which fairly may be expected to advance the course of an administration, and in particular, for present purposes, an administration under a deed of company arrangement.”
His Honour then added the further observation at 333:
“What then is the purpose to be served by giving power to administrators under deeds to apply to examine “examinable officers”? In my opinion that purpose, shortly, is to enable the prompt and effective carrying out of the scheme contained in a deed of company administration. Any proper inquiry into the “examinable affairs” of the corporation which will fairly conduce to that end may be effected by an examination sought by such an administrator. On the other hand, if the examination be sought for private purposes, oppressively or for any purpose not genuinely related to the administration, then a person adversely affected can complain to the court that the relevant power is being used for purposes foreign to those for which it is conferred. But, bearing in mind the variety of company arrangements which are now permitted under the Law, an examination intended to assist the enforcement of the rights or claims of relatively few persons affected by an arrangement may nevertheless be proper and appropriate. The legislature, it would seem, has acknowledged the benefits that deeds of this kind can provide to both companies and creditors and has therefore given explicit power to administrators to apply for examinations upon the same basis as liquidators have applied in the past, but with the added benefits of the new procedures laid down in the 1992 amendments.”
I return to Worthley, and to some remarks on which Mr Wells placed considerable reliance. The Court referred to the fact that an unsecured creditor might use the examination procedure to ensure his debt was paid, but all unsecured creditors would benefit rateably from that. It said that examination by a secured creditor might benefit the company by uncovering assets that could be used to pay the secured creditor, and by revealing other assets available for unsecured creditors. The Court then said at 93:
“The present litigation in which the Trustee for debenture holders and the debenture holders themselves are engaged is somewhat different. It alleges a loss to debenture holders as a result of the acts of Mr Worthley and claims that they are entitled to recover damages in respect of that loss. Success in these proceedings would not necessarily free the corporation from the obligation to pay the Trustee for debenture holders.”
After explaining why there might be no benefit to the corporation or its creditors, the Court added:
“…we are of the view that the use of the power to obtain an examination summons for the principal purpose of furthering the cause of the applicant for the summons or, as in this case, appointor of the applicant in litigation against third parties, not for the benefit of the corporation, its contributories or creditors (other than in the most indirect way) is a use of the power for a purpose foreign to that power and thus an abuse of the power. Such a purpose would provide to the examiner the opportunity for pre-trial depositions which would not be available in the litigation.”
Mr Wells placed considerable emphasis on these remarks. In his submission, they should be treated as authoritative in relation to s 596B, even though the remarks were made in relation to the provision in an earlier form. He argued that they emphasised the need to show an examination order might result in some advantage to the corporation in question, its creditors generally or its contributories. In Flanders, referring to the changes in the legislative provisions since the decision in Worthley, Ormiston J said at 335:
“Nevertheless it is unnecessary to doubt the opinion expressed in Worthley’s case that under the unamended provisions of s 597 it was necessary to show that the proposed examination was for the benefit of the corporation, its contributories or its creditors. What is clear, however, is that the scope of the examination provisions was greatly expanded by the 1992 amendments.”
He then added:
“Now the powers given under s 596A to 597B are clearly so wide and so easily exercised by “eligible applicants” (cf s 596A) that the purposes to be served by examinations ought not be limited by reference to the benefit of the company or its creditors or contributories. The objects to be served by the issue of an examination summons and the making of orders for examination should be discerned only by reference to the statutory provisions which invest those powers. If those powers are being used for oppressive purposes or to serve ends entirely outside the scope of the sections, such as to gather evidence for libel proceedings, then the court will intervene to prevent the examination. As to the precise ambit of the power of the commission to authorise applications under the new sections, it is unnecessary to express any further opinion.”
Mr Wells argued that nothing said by Ormiston J undermined what was said by the Full Court of the Federal Court in Worthley, in the passage cited. He relied on the acknowledgment made by Ormiston J that a so called “private purpose” was not a proper purpose for the making of an order under s 596B. As to that I refer to the observations of Ormiston J at 333 and at 335, set out earlier in these reasons.
There is a further point to be made. In Worthley I consider that the Full Court, in the passages cited, was distinguishing between an examination the main purpose of which was simply to improve the prospects of success in litigation of a particular creditor or class of creditors, and an examination which also had the purpose or some prospect of, benefiting the corporation, its creditors or contributories in some way. Also in Worthley the Court was not concerned with the possible exposure of misconduct.
I make the following points based on these citations.
It is important that there be uniformity of approach, so far as possible, to the provisions of the Corporations Act. This Court should not depart from previous decisions of other courts that are in point, unless satisfied that they are wrong and that, on balance, it is better to depart from them. I am not so satisfied on either point.
Some general conclusions can be drawn from these decisions. Like all general conclusions, they are to be applied with care, and with a view to the circumstances of the particular case.
This line of decisions establishes that the discretion conferred by s 596B is a wide one. It is to be exercised to enable enquiry to be made into the examinable affairs of a corporation, with a view to exposing misconduct (which might attract civil or criminal sanctions, or possibly action by a body such as a professional regulator) or which might provide information that will advance (in a broad sense) the external administration of the corporation in question.
The fact that a consequence of an examination order may be a forensic advantage to a particular class of creditors, or to a particular creditor, of the corporation, or to a particular person, does not of itself lead to the conclusion that the order was not made for a proper purpose. Nor does the fact that the order was made at the instance of that person or creditor. On the other hand, the power is not conferred with a view to its exercise solely to benefit an individual with a claim of some kind against the corporation in question, or with a claim arising out of its affairs. Nor, I consider, is it conferred to enable an applicant for an order to pursue an enquiry into a matter in relation to which the applicant has no legitimate interest.
It may be that the observations by Malcolm CJ in Furzer requires some qualification in relation to the prosecution of civil proceedings by an individual creditor, when the purpose for making an order is said to be solely or primarily to assist that creditor in connection with those proceedings. In New Cap Reinsurance Corporation Holdings Ltd and the Corporations Law [2001] NSWSC 835 Santow J referred to the observations by Malcolm CJ that I set out above, and made the following observation at [15] with which I agree:
“15 I should here emphasise two things. First, such a creditor’s action against a third party, who is not the company in liquidation though likely to be associated in the relevant events, must in some way have the potential, at the least, either to assist the liquidation (in the sense of the beneficial winding-up for creditors as a whole), or serve the wider statutory purpose of investigating and potentially prosecuting (civilly or criminally) those who have contributed to the circumstances that have led to that corporate collapse. One or other of the foregoing suffices to legitimate the purpose of a creditor seeking access to the product of a compulsory examination. Both in combination certainly would.”
See also Re GPI Leisure Corporation Ltd (In liq) (1994) 53 FCR 365 at 374.
I consider that the above propositions are not in conflict with the observations of the Full Court in Worthley, on which Mr Wells put particular reliance. Those observations must equally be understood in their context. In that case the Federal Court, in the context of a liquidation, said no more than that advancing the interests of a particular creditor, or creditors of a particular class, in circumstances where that would give rise to no advantage or benefit to the liquidation of the corporation in question, was not a sufficient reason for the making of an order, and for that reason the examinee should be given access to the affidavits filed on the application for the examination order, before the court decided whether the order was properly made.
Were the examination orders properly made?
I consider that the examination of the examinees, with a view to determining whether they or Deloitte were in breach of their professional duty to Normans, is an examination for a purpose contemplated by s 596B.
First, such an examination might expose misconduct by Deloitte, or by members of that firm, which would be of legitimate interest to ASIC or to those responsible for the regulation of the auditing profession. Sandhurst as trustee has a legitimate interest in exposing such misconduct, if it occurred, if that misconduct caused or enabled Normans to breach its covenants, that in turn causing loss to the noteholders.

Second, the examination might provide evidence pointing to a possible claim by Normans against Deloitte for breach of duty, or to a possible claim by Sandhurst (subject to what I say later about its claim and the effect of the deed) against Deloitte or to a possible claim by the noteholders against Deloitte. A successful claim by Normans might enhance the prospect of the noteholders recovering a payment from Normans. A claim by Sandhurst or by the noteholders, if successful, might reduce the claims against Normans, by recompensing Sandhurst or the noteholders for their loss. It is not obvious that Deloitte would be subrogated to the rights of Sandhurst or the noteholders against Norman, nor is it necessary to decide that question. It suffices to say that if the examination produced information that supported a claim by Normans, Sandhurst or the noteholders against Deloitte, that is something that might be in the interest of the creditors and contributories of Normans.
At the least the information disclosed by the examination should enable Sandhurst to advise the noteholders whether Sandhurst should proceed with its action as it is, reshape it or abandon it, or whether Sandhurst should recommend that the noteholders bring their own action against Deloitte, or take other action to protect their investment. Section 1056(6) and s 1057 of the Corporations Law contemplate a trustee for debenture holders taking action to protect the interests of debenture holders, in particular by placing before them information relating to their interests, and proposals to protect their interests: s 1056(6)(a).
As to the possibility of a claim by the noteholders, I make the point that the examination order might uncover facts entitling them to an extension of the relevant limitation period.
In exercising these functions as trustee for the noteholders (that, is obtaining information with a view to putting information and proposals before the noteholders) Sandhurst is discharging a statutory function (subject to the effect of the deed) with a view to the taking of action by Sandhurst or the noteholders that might ultimately benefit the contributories or creditors of Normans. In that way the beneficial winding up of Normans would be advanced.
Third, the orders might result in the disclosure of information of general relevance and assistance to the liquidator of Normans. A proper concern of the liquidator would include the question of whether the relevant borrowing by Normans was properly undertaken, and whether it involved any breach of duty by officers of Normans or by its advisers.
In short, I consider that the examination orders are made for a purpose contemplated by s 596B because they might result in the obtaining of information of legitimate interest to ASIC, to the regulators of the auditing profession, and to the liquidator of Normans. That information might also assist Sandhurst as trustee for the noteholders to decide whether action should be taken by Sandhurst or the noteholders by way of a claim against Deloitte, which action could advantage the creditors and contributories of Normans.
I consider that Mr Wells’ submissions put undue emphasis on the existing claim by Sandhurst against Normans, treating it as the sole basis for the making of the examination orders. The advancing of that particular claim is a possible basis for the examination orders, but I agree with Mr Wells’ submissions that it is a flimsy one. But in my opinion the orders can be justified on the broader basis outlined by me.
Although I consider that the emphasis on the claims presently pleaded is misplaced, it is appropriate nevertheless to make some comments on the submissions that Mr Wells advanced.
There is considerable force in his submission that the action by Sandhurst against Deloitte does not raise a cause of action that is trust property, or a cause of action maintainable by Sandhurst.
There is no allegation that Sandhurst subscribed for the notes issued by Normans. The decision to subscribe was, it seems, made by the individual noteholders.
The deed does not provide for Sandhurst to hold the notes on trust for the subscribers. The deed by clause 5.1 requires Normans to pay the principal and interest directly to noteholders :
“… unless the Company, with the consent of the Trustee, or at the direction of the Trustee pays to the Trustee the Money Owing as and when due in accordance with the Conditions.”
There is no allegation of a consent or direction by Sandhurst.
The deed contains covenants by Normans with Sandhurst, apparently in conformity with the requirements of s 1054 of the Corporations Law, as to the provision of accounts and reports and information, as to the “proper and efficient” conduct of Normans’ business and as to the ratio of Normans’ liabilities to total assets: clause 6 and clause 7. The deed defines an “event of default” to include a default in payment, a material breach of a covenant and a winding up, and then provides as follows in clause 8.2:
“8.2       Action upon an Event of Default
8.2.1Upon the occurrence of an Event of Default, the Trustee on behalf of Noteholders may only take action as set out in this Clause 8.2. However, nothing in this Clause 8.2 prevents the Trustee from taking any action permitted by Clause 8.4 or 8.5 or bringing proceedings or taking any other action from time to time to recover monies owing to it.
8.2.2The Trustee will be entitled where an Event of Default has occurred:
8.2.2.1to commence proceedings for the winding up of the Company or take such other action relating to enforcement of payment of Moneys Owing to Noteholders (including without limitation issuing Redemption Notices requiring the Company to redeem the Convertible Notes) but the proceeds of any such enforcement action must be dealt with in accordance with Clause 8.6; and
8.2.2.2to prove in any Liquidation of the Company (irrespective of when that Liquidation is commenced) subject to this Deed, and in particular to the provisions set out in Clause 8.6.”
Clause 8.4 then provides:
“8.4       Permitted Actions by Trustee
Nothing in this Deed shall exclude, limit, defer or otherwise prejudicially affect:
8.4.1the right of the Trustee to seek directions from a court pursuant to section 1057 of the Corporations Law or to take any other proceedings seeking the directions or guidance of any court, tribunal or other authority as to the performance of its functions and duties pursuant to this Deed;
8.4.2any proceedings taken by the Trustee and/or any Noteholder at any time seeking a judgment or order declaratory of the rights or obligations of any Noteholder or any of the parties to this Deed;
8.4.3the right to take proceedings in respect of any breach or threatened breach of, or to compel or enforce performance of, any of the covenants, undertakings and obligations of the Company hereunder other than in relation to the payment of Convertible Note Obligations prior to the Company entering Liquidation;
8.4.4the right to take proceedings under the Constitution; or
8.4.5the right to take proceedings for the Liquidation of the Company for failure to redeem a Convertible Note, in any circumstances where the Conditions or this Deed specifically give that power to the Trustee.”
Clause 8.5 and clause 8.6 are not relevant. Clause 8.7 provides:
“8.7       Actions by Noteholders
Only the Trustee may enforce the provisions of this Deed and the Convertible Notes (including without limitation applying for Liquidation, lodging a proof or claim or seeking damages) except that a Noteholder, subject to Clause 8.3, may proceed directly against the Company to enforce the performance of any of the provisions of this Deed or the Convertible Notes if the Trustee has failed to do so and at least 21 days have elapsed since that Noteholder has given the Trustee and the Company notice of that Noteholder’s intention to do so.”
The Statement of Claim does not allege that breaches of duty by Deloitte caused Sandhurst (or, indeed, the noteholders) to subscribe for the notes. It does allege (in paragraph 101) that because of breaches of duty by Deloitte, Sandhurst “did not take steps to prevent the issue of the convertible unsecured notes”, and that Sandhurst and the noteholders thereby suffered loss or damage, being the money subscribed. But it is difficult to see how it can be argued that Sandhurst suffered loss in this way, and the noteholders are not parties to the action.
The Statement of Claim does not allege that the noteholders’ entitlement to payment in respect of the notes vested in Sandhurst. It is difficult to see how it can be argued that the entitlement to payment is trust property held by Sandhurst.
Nor was Deloitte engaged by Sandhurst in its capacity as trustee to exercise professional skills for Sandhurst’s benefit.
Accordingly, I agree that the claim by Sandhurst that it suffered loss by reason of breaches of duty by Deloitte faces serious obstacles, as does a claim (if it is intended to be made) that Sandhurst has a claim as trustee to recover losses suffered by the noteholders, or an entitlement as trustee (supporting a claim to compensation) to payment of monies due in respect of the notes.
Sandhurst also claims a declaration that Deloitte’s conduct was misleading and deceptive, and in breach of its statutory duties. But a court would not grant a declaration respecting such matters (or a declaration respecting a breach of a duty of care) unless there was some good reason to do so. It is not easy to see why a court should do so in the action brought by Sandhurst. I doubt whether it would do so on the basis that such a declaration might assist a noteholder in an action against Deloitte.
For those reasons, without going into further detail, I agree with the submission by Mr Wells that the action brought by Sandhurst provides a tenuous basis for the making of the examination orders. It is a tenuous basis because it is difficult to see how the action can succeed as it stands. If the action cannot succeed, it could not provide a basis for the making of the orders: see Flanders at 337. It is not appropriate to go beyond that. The action is not before the court. To this extent I accept Mr Wells’ submissions.
But, as I have explained, when the matter is viewed more broadly the examination orders are supportable under s 596B.
Does the deed deny Sandhurst the power to seek or to implement the examination orders?
I turn now to the impact of the deed on the resolution of the appeal.
In Re Italo-Australian Centre (1999) 30 ACSR 388 at 397 Lee J doubted whether a Deed of Company arrangement under which an administrator was appointed, could “curtail or circumscribe” the extent of the powers conferred by s 596A and s 596B.
I agree with that observation as a general proposition. However, the provisions of such a deed, and the provisions of the deed in this case, may be relevant to the question of whether it is an appropriate case in which to make an order. Those provisions might support an argument that the applicant for an examination order has no legitimate interest in the matter to be enquired into. For example, if the only basis for making the order in this case was that it might assist Sandhurst to make a claim for loss suffered by Sandhurst, thus reducing the claim against Normans, and if the terms of the deed led to the conclusion that Sandhurst suffered no loss, it is difficult to see why an order should be made. The capacity in which the applicant for an examination order acts, and the powers or functions or capacities being exercised, may well be relevant to the decision whether or not an examination order should be made. As well, it is conceivable that a case might arise in which the applicant for an order did lack the legal capacity to exercise the powers conferred by s 596A and s 596B, although I do not find it easy to envisage such a case.
I agree that the powers and functions of Sandhurst under the deed are limited in their scope. I agree also that an event of default as defined in the deed has occurred. However, I do not consider that clause 8.2 of the deed exclusively or exhaustively regulates what Sandhurst may do in the present circumstances, or in circumstances in which an event of default has occurred. Clause 8.2 is directed mainly to action that might be taken by Sandhurst against Normans. The limitations in clause 8.2 are for the benefit of Normans, not for the benefit of third parties. Mr Wells agreed, as I understood him, that there could be circumstances in which, if a third party had wrongfully taken trust property, or caused loss to the trust estate, or was holding trust property, Sandhurst could bring action against the third party to recover that property or compensation or damages, even though such action is not apparently empowered by clause 8.2. In other words, he acknowledged that Sandhurst’s role as trustee for the noteholders necessarily implied that it had certain capacities or powers that could not be found in the deed itself. On the other hand, as I have already said, I agree that the action that Sandhurst has instituted does not appear to be a claim of the kind which Mr Wells acknowledged Sandhurst had the capacity to bring, because the right to bring the action does not appear to be trust property under the deed, nor are the notes themselves or the subscribers’ rights to repayment trust property under the deed, at least absent a consent or direction under clause 5.1 of the deed. But the concession that Mr Wells rightly made in my opinion, acknowledges that the powers or functions of Sandhurst are not to be found exclusively in the deed. On the other hand, I again agree with Mr Wells that it does not follow that Sandhurst has power or capacity to do anything that might seem convenient or desirable in the interest of the noteholders, without regard to the terms of the deed.
Section 1056 of the Corporations Law states certain duties to be performed by trustees. Clauses (d), (e) and (f) of subsection (1) provide as follows:
“A trustee for the holders of debentures of a corporation:
…..
(d)shall exercise reasonable diligence to ascertain whether or not the borrowing corporation and each of its guarantor bodies have committed any breach of the covenants, terms and provisions of the debentures or the trust deed;
(e)except where it is satisfied that the breach will not materially prejudice the security (if any) for the debentures or the interests of the holders of the debentures – shall take all steps and do all such things as it is empowered to do to cause the borrowing corporation and any of its guarantor bodies to remedy any breach of those covenants, terms and provisions;
(f)where the borrowing corporation or any of its guarantor bodies fails, when so required by the trustee, to remedy a breach of the covenants, terms and provisions of the debentures or the trust deed – may place the matter of the failure to remedy the breach before a meeting of holders of the debentures, submit such proposals for the protection of their investment as the trustee considers necessary or appropriate and obtain the directions of the holders in relation to the matter; and ….”
The application for examination orders under s 596B is an appropriate precursor by Sandhurst to its submitting proposals to the noteholders for the protection of their interests, including the possibility of action against Deloitte for breach of duty. The power to submit proposals to the noteholders necessarily implies, in my opinion, that Sandhurst has the capacity and power to enquire into the possible breach of covenants by Normans, and circumstances relevant to that breach, which might provide a basis for a proposal for the protection of the noteholders’ investment. This again necessarily implies, in my opinion, the capacity to exercise available powers of investigation, such as those conferred by s 596B. The provisions to be found in s 1056 (and the provisions also to be found in s 1057) are not limited to enquiring into and considering possible action against Normans as the borrowing corporation.
I consider that the statutory scheme found in Division 4 of Part 7.12 of the Corporations Law carries the implication that Sandhurst as trustee for debenture holders (the noteholders) has power to take action in the interests of the noteholders, including investigating a breach by Normans of the covenants in the deed (for example, an unauthorised borrowing), with a view to submitting proposals to the noteholders for the protection of their interests, such proposals including the possibility of a claim for damages or compensation against a third party involved in a breach of the covenants. Indeed, Clause 8.4.1 of the deed appears to me to contemplate such action, and by implication to confer the power or capacity to take the steps necessary to prepare proposals for submission to the noteholders.
It is not necessary at this stage to decide whether or not Sandhurst can itself bring action to recover loss suffered by the noteholders. Even though the present action appears to be unsustainable, it may be that it can be re-cast, or that other proceedings (perhaps based on a direction by Sandhurst under clause 5.1 of the deed) by Sandhurst could be brought. At present it suffices to say that Sandhurst, as trustee, has the power to consider what proposals if any should be submitted to the noteholders, and by implication has the capacity to exercise available statutory powers that will enable it to enquire into that matter.
Likewise, if the liquidator were to conduct an examination into a possible breach of duty by Deloitte relating to the borrowing in question, I consider that Sandhurst would have the capacity to exercise the statutory right under s 597(14A) of the Act to inspect the transcript of the examination, with a view to formulating proposals based on the information gained.
For those reasons I respectfully consider that the Master erred, and that Sandhurst has the capacity to exercise the powers conferred by s 596B.
Other issues
The only remaining issue is the submission that Sandhurst was guilty of material non disclosure when it applied for the examination orders. As to that, I agree with the reasons given by the Master for rejecting that submission. There is nothing I wish to add to those submissions, other than to say that I see no reason why there should not be co-operation between the liquidator of Normans and Sandhurst, in relation to the possibility of a breach by Deloitte of duties owed by it to Normans or to Sandhurst or to the noteholders, with a view to a possible claim against Deloitte. Co-operation of this kind, within limits, is not a reason to refuse to make an examination order, unless it appeared that the making of an order on application by Sandhurst is likely to cause Deloitte to suffer unnecessary inconvenience or expense, or to be subjected to unnecessary examination. That is a matter that can be dealt with when the examination takes place. If Deloitte contends that it is unnecessary or unreasonable for it to submit to examination at the instance of Sandhurst, as a result of action taken by the liquidator, that can be dealt with in light of the actual circumstances, rather than in an anticipatory fashion and at large.
Conclusion
For those reasons I would allow the appeal, set aside the order by the Master that the examination orders and orders for the issue of an examination summons and for the production of documents be set aside, and substitute an order dismissing the application made by the examinees for the setting aside of those orders.
PERRY J I agree that the appeal should be allowed, for the reasons given by Doyle CJ.
I would add some further observations.
Invariably, applications for examination orders pursuant to s 596A or s 596B of the Corporations Act 2001, are brought in order to obtain an order which, it is thought, will assist in the making of decisions by the applicant as to other action which may be taken concerning the corporation. Commonly, but not always, that action may be the commencement of proceedings against the corporation, or the continuation of such proceedings already in train.

In that sense, the institution of proceedings seeking an order under either section will always be for a collateral purpose. But to use that description does not mean that the proceedings will necessarily constitute an abuse of process. In this context, “collateral purpose” cannot be equated with “abuse of process”.
There is much discussion in the cases as to what may or may not be a legitimate object to which an application for such an order may properly be directed.
It is clear from the authorities referred to by Doyle CJ that it is no longer a requirement that the application be directed towards benefiting the company or corporation as a whole, whatever that phrase may mean; see the dictum of Ormiston J, with whom Tadgell and Harper JJ agreed, in Flanders v Beatty and Anor:[1]
“Now the powers given under s 596A to s 597B are clearly so wide and so easily exercised by ‘eligible applicants’ (cf s 596A) that the purposes to be served by examinations ought not be limited by reference to the benefit of the company or its creditors or contributories.” (emphasis added)
[1] (1995) 16 ACSR 324 at 335.
In Worthley v England,[2] the Full Court of the Federal Court (Gummow, Hill and Cooper JJ) said:[3]
“In Re North Brazilian Sugar Factories,[4] it was suggested that the comparable power should be used only for the benefit of the corporation or its shareholders generally and not, for example, to obtain evidence in support of actions by individual shareholders for their own benefit against the directors of the company (see per Cotton LJ at 87 and per Lopes LJ at 88). That suggestion was rejected by McLelland J in Re BPTC Ltd,[5] ….McLelland J said of the North Brazilian Sugar Factories case:[6]
‘In my opinion such a limited view cannot be regarded as acceptable at the present day. Facilitation of the accountability to individual creditors or contributories, as well as to the company itself, of those who participated in the conduct of its affairs prior to the winding up should nowadays be regarded as sufficiently related to the winding up to fall within the scope of the section’.” (emphasis added)
[2] (1994) 52 FCR 69.
[3] Ibid 91-92.
[4] (1887) 37 Ch D 83.
[5] (1992) 10 ACLC 271.
[6] Ibid 273.
Later in their judgment, the members of the court observed:[7]
“The applicant for an examination order in Re Laurie Cottier Productions Pty Ltd[8] was, as has already been observed, not the creditor. Nevertheless, there could be no objection to the use of the examination procedure on application by a creditor whose purpose was to ensure that his or her debt was paid. After all, if the creditor were unsecured the interests of that creditor are no different from the interests of all other creditors who share rateably in the distributable assets of the company. Even in a case where the creditor was a secured creditor, the fact that the purpose of the examination was to aid the ultimate recovery of the secured debt by, for example, the ascertaining of the existence of assets would operate to the benefit of the company by ensuring that it paid out the secured creditors and that there was then revealed what other assets (if any) were available for distribution to unsecured creditors.” (emphasis added)
[7] Ibid 92-93.
[8] (1992) 9 ACSR 513.
There are many examples of examination orders being made to support a claim by a creditor that a director or former director was associated with insolvent trading by the company in circumstances attracting a personal liability on the part of the examinee to repay the debt (s 588M(3)).
New Zealand Steel (Australia) Pty Ltd v Burton[9] concerned such a case. In that case, Hayne J pointed out:[10]
“Thus while New Zealand Steel [the creditor] may pursue the examination for its own ends - ends which are private to and concern only it - the examination will be of matters of concern to others affected by the failure of this company.”
[9] (1994) 13 ACSR 610.
[10] Ibid 619.
As Hayne J observed, that the examination would be of matters of concern to others was a consequence of the fact that the record of examination would be open to any other creditor, or the Australian Securities Commission (as it then was).
It follows that although the discretion of the court to refuse an application on the ground that it would amount to an abuse of process remains, it will not amount to an abuse of process simply to demonstrate that the application is brought by a single creditor to pursue his or her own ends.
I concur in the order proposed by Doyle CJ.
BLEBY J I agree with the orders proposed by Doyle CJ and with his reasons.