Walton & Anor v ACN 004 410 833 Limited (Formerly Arrium Limited) (In liquidation) & Ors

[2021] HCATrans 155

[2021] HCATrans 155

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S20 of 2021

B e t w e e n -

MICHAEL THOMAS WALTON

First Appellant

ANTHONY BOGAN

Second Appellant

and

ACN 004 410 833 (FORMERLY ARRIUM LIMITED) (IN LIQUIDATION)

First Respondent

KPMG

Second Respondent

COLIN GALBRAITH

Third Respondent

KIEFEL CJ
GAGELER J
KEANE J
EDELMAN J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE, SYDNEY AND MELBOURNE

ON THURSDAY, 7 OCTOBER 2021, AT 10.00 AM

(Continued from 6/10/21)

Copyright in the High Court of Australia

____________________

KIEFEL CJ:   Yes, Mr Izzo.

MR IZZO:   May it please the Court.  Your Honours, in light of the way the case was put yesterday by the appellants, the area for disputation between us is in fact exceedingly narrow.  Can I begin, by way of overview, by identifying what we understand is common ground, and what we understand is in dispute?  I can do this, conveniently, by reference to the propositions in the oral outline, which I will obviously return to develop where appropriate.

The first matter of common ground is this, that there are two purposes for which the examination power in section 596A is conferred.  That is paragraph 4.  We are ad idem on that point.  The second element of common ground is the balance of paragraph 4, that is we are agreed that the first of the two purposes for which the examination power in section 596A is conferred is to aid the external administration of the company.

Given the way in which the case was developed yesterday, the appeal does not turn on that first purpose, it does not turn on that first purpose because my learned friend, Mr Hutley, made it clear on a number of occasions and in his oral outline that the appellants now pitch their case by reference to the second purpose only.

Now, there is a dispute about the precise scope of the second purpose.  We deal with that in paragraph 10 of our oral outline and we contend that, to the extent there is a purpose underlying the power in section 596A other than the purpose of aiding the administration, the external administration of the company, that purpose involves the bringing of proceedings seeking civil or criminal sanctions against those involved in the company’s affairs.  It is what I will refer to as a regulatory purpose.

GAGELER J:   Mr Izzo, can I ask the sense in which you are using the word “purpose”?  Are you referring to a legislative object of conferring the power or are you referring to purpose in some other differing…..

MR IZZO:   I am not referring to it in the first sense, your Honour.

GAGELER J:   Can you explain the sense in which you are referring to it?

MR IZZO:   Yes.  I am referring to purpose in the sense of the end or result which may permissively be achieved by the process of the court that is invoked.  In other words, I am invoking the language used in Williams v Spautz which in turn picks up the language of Sir Isaac Isaacs in Dowling and was recently picked up by your Honours in the case of Lunt.

In other words, we are concerned with the doctrine of…..process in a sphere where one is able to identify an end or result for which a process of the court is conferred or exists.  And one then asks, is the purpose of the applicant for the summons within the scope of that end or result. 

GAGELER J:   Can I ask this:  how does the impermissibility of the purpose or the limits of the admissible purpose relate to the statutory object?

MR IZZO:   Well, the statutory object may be relevant in the question of construction, which is necessary in order to arrive at an understanding of what the end or result for which the power is conferred because obviously that question is not always obvious and it is not always express in the terms which confer the power, and certainly here is not express and not necessarily to be found in the essential prerequisites – the preconditions – to be exercised with the power.  It is a different exercise which involves, obviously enough, construction of the statute because that is where one must find the basis for any person’s articulation, whether ours or the appellant’s…..end for which the power may be exercised will be.

EDELMAN J:   Mr Izzo, do you then say that conduct, or a purpose which falls outside the end or result that might permissibly be achieved is one to be assessed objectively?  In other words, from all of the circumstances in the conduct, or do you say that it is something to be assessed subjectively, even if, for example, the conduct would otherwise be within the scope and purpose of the provision?

MR IZZO:   It is a very difficult question, with respect, your Honour, because there is a subjective element to it, because one has to ask what are the appellants attempting to achieve?  But in answering that question, there is a question of characterisation involved, and the best way we have found of encapsulating that question is the decision which we had sent up this morning - I do not know if your Honours have it - of the judgment of Justice Gleeson in News Limited v South Sydney District Rugby League Football Club 215 CLR 563. We have sent it up separately this morning, it is 215 CLR.

This was obviously a case decided in a very different context, which was purpose within the context of competition law, but the observations of the Chief Justice on this issue are, in my submission, apt.  If one goes to paragraph 18, his Honour in the second sentence was dealing with the “distinction between purpose and effect”, but in coming to that, if one skips a sentence, he also distinguished between purpose and motive.  If your Honours see, immediately after footnote 16, the Chief Justice says:

Purpose is to be distinguished from motive.  The purpose of conduct is the end sought to be accomplished by the conduct.  The motive for conduct is the reason for seeking that end.

And your Honours will immediately recognise there the distinction that your Honours drew recently in Lunt, which itself was based on Williams v Spautz and Dowling, between a motive and a purpose.  So the Chief Justice says the purpose of the end, then skipping:

The appropriate description or characterisation of the end sought to be accomplished (purpose), as distinct from the reason for seeking that end (motive), may depend upon the legislative or other context in which the task is undertaken.

His Honour then, in the next sentence, I will not read it to your Honours, deals with the way one characterises, in a – one must do it in a relevant way, that is relevant to the object one is trying to work out, whether you have consistency with it.

To try and…..if I can attempt to make it a little bit more concrete, the appellants no doubt have various motives for bringing their class action, some of which are conflicting, some of which may have nothing to do with them and may have more to do with litigation funders and other people.  They are all issues that your Honours do not need to worry about, but the purpose for which they are bringing it is quintessentially a question of characterisation . 

One has to characterise in a manner relevant to the end which is permitted by the process what the appellant’s purpose is and if, as we say, the end permitted by the process here is either to aid the external administration of the company or to aid the regulatory proceedings, one has to ask can one characterise what the appellants are trying to do as being either of those things.  In answering that question, one understands whether or not the appellants are acting for a purpose that is within the scope of the process.

It is a very longwinded way of answering  your Honour’s question, but it is how we conceptualise the exercise that has to be undertaken in a case such as the present.

STEWARD J:   Can I ask, I am sorry:  how does your identification of the permissible purpose square with the Court of Appeal’s concern about whether the examination is for the benefit of the company, the creditors or contributories?

MR IZZO:   Can I deal with that immediately, your Honour, because I was going to go to the Court of Appeal’s judgment and I think I will do so now, as it is very important.  Sorry, just to step back before I do so, there is one other point I wanted to make, and it is important that I make it before I go to the Court of Appeal’s judgment.

The point is this – and it is in a sense the final element of common ground.  The final element of common ground is this, that if one is within the second purpose – certainly the way we characterise it, but our friends say even the way they characterise it – one is not concerned with a benefit to the company, its creditors or contributories.  We say one is concerned with that issue if one is within the first purpose – and we have dealt with that in paragraphs 5 through to 8 of our outline, but we accept at paragraph 10 of our outline that the second purpose, certainly the way it is articulated, is not confined, and we said that in the second sentence of paragraph 10 of the outline – it is not confined by any such requirement.

Your Honours may then be wondering, as your Honour Justice Steward was wondering, why the Court of Appeal was so focused on the need for a benefit.  The answer to that question is that that is the principle and, indeed, almost – that is the principle – I withdraw that.  The answer to the question is that it is because the case before the Court of Appeal was put principally by reference to the first purpose that the court was concerned with the benefit to the company, its contributories and creditors.

Can I show your Honours how that arises?  If your Honours go to the core appeal book, the argument relevantly can be picked up at page 124, paragraph 115 of the judgment, and the relevant sentence is the last sentence at paragraph 115 – this is under the heading, your Honours will see, “The respondent” and the Court of Appeal summarising the arguments of the two parties ‑ three parties.  In the last sentence of 115, “He submitted”, that is senior counsel for the respondents:

submitted that if the examination can be seen to benefit the company, irrespective of the subjective purpose of the applicant, there is not an abuse of process.

Now, that proposition engages what is really the matter of contention point, that is if there is objectively a benefit, does it matter that you were not subjectively trying to bring that benefit about?  That was actually one of the central spheres of contest before the Court of Appeal.  We no longer maintain that you subjectively need to bring about the benefit if you are acting for the first purpose, you only need to have an action which can be characterised in the way I have attempted to explain to your Honours – characterised as achieving the first purpose, that is aiding the external administration which, we say, does involve a requirement of benefit.

The respondents below, in effect, adopted that requirement as the premise of their argument.  That is, if there is a benefit, your purpose is proper, and they said further it does not matter whether you objectively intended to bring about that benefit.  Paragraph 116 is also important because the submission that:

He submitted that it followed from Marvin Manufacturers that where the liquidator could have examined about the same subject matter . . . [it cannot be] an abuse of process.

Again, we are squarely within the first purpose because as my learned friend said yesterday, a liquidator conducting an examination is acting to bring in assets and it would be very surprising, as my learned friend Mr Hutley said, if the liquidator was doing anything else other than bringing in assets for the benefit of the creditors and, if relevant, the contributory.

And what our friends were saying below was that, well, if the liquidator can do it because that exercise, bringing in assets, is permissible, then it does not matter why we are doing it.  And the argument proceeded on that basis again in paragraph 118 in the third sentence:

He stated that was because the matters the subject of the examination were matters that were proper for a liquidator to investigate. 

And then all of that raised the question of, well, what is the benefit?  If you say you can do it – if you say a liquidator could do it, it is only because this action could benefit the creditors.  What is the benefit?  That is addressed in 120, the third sentence at line 40:

He accepted that the only loss that could be identified was the cost of the capital raising.

Sorry, the previous sentence:

He said they involved possible claims by Arrium. 

So, the idea was there is a benefit here because whatever the appellants want to achieve, whatever their motive may be, what is important is that they are bringing about an end – recovering loss for the company – namely the loss from the capital raising.  As your Honours know, that is the case that the Court of Appeal rejected on the basis that that is not actually beneficial because – your Honours are aware of the reasoning, I will not take your Honours back through it.

That was the thrust of the case and that is chiefly what is dealt with by the Court of Appeal.  There is one hint, however, of the argument that our friends now make and it is in the last sentence of paragraph 121.  And in that sentence the Court of Appeal records the argument, “He stated” – senior counsel for the respondent:

He stated the summons was justified on the basis that the shareholders’ loss arose as a result of the misconduct of the company in liquidation. 

So, certainly we accept that there is a hint of a broader argument and we certainly do not say that our learned friends are precluded from running that argument in this Court.  And it was there, and it was dealt with briefly by the court at paragraph 136.  At 136 the court said:

It is correct that Gleeson CJ and Hayne J in the passages which we have cited emphasised . . . the public benefit in exposing conduct which may affect other creditors or go to the protection of shareholders, creditors and interested members of the public.  This is consistent with what was said by Mason CJ in Hamilton v Oades that one purpose was to support the laying of criminal charges. 

We will come to it but that is the germ of what we will call second purpose, namely, Chief Justice Mason’s statement about laying criminal charges.  The Court of Appeal says:

We do not think their Honours were stating that any private examination would be within the scope of the power merely because the examination might reveal matters demonstrating such conduct if that was not the purpose of the examination ‑

I will stop there, because the words that follow are distracting, and I will explain what they mean.  But what the Court of Appeal is saying is that you do not achieve the second purpose ‑ there characterised as exposing misconduct, here we would characterise it as the bringing of regulatory proceedings ‑ you do not achieve that purpose simply because you might reveal matters that demonstrate such conduct if that is not the purpose of the examination.  And the use of the word “purpose” there is that exercise of characterisation I have referred to.

The appellants were not seeking to support the laying of criminal charges, they are not seeking to support the bringing of civil penalty proceedings.  What they are doing can be found most conveniently in the trial judge’s judgment at page 17, paragraph 18, that is page 17 of the core appeal book, and there is a very helpful and, I think, the most detailed explanation your Honours will find of the nature of the action.  I think your Honour the Chief Justice was asking about this yesterday, what do we know about the action, what are they seeking.  This was the advertisement that was put on a website to attract potential participants in the class action, and at about line 13 you will see the reference to:

possible proceedings to recover losses –

and then, most importantly, at line 30:

That information identified a claim that the Plaintiffs and group members had suffered loss and damage by the purchase of Arrium shares –

and:

[t]he class action is currently concerned with recovering losses –

So if one is concerned with the question of characterisation as relevant to the statutory purpose, the proper characterisation of what the appellants are doing is bringing a class action to recover their losses and the losses of those within the class.  That, we say, is quite different to a purpose of bringing regulatory proceedings, and that is why the Court of Appeal was correct to say, in paragraph 136, that the fact that you might reveal misconduct which might assist regulatory proceedings or criminal charges is not enough.  In that sense, you cannot characterise it as ‑ ‑ ‑ 

EDELMAN J:   Mr Izzo, is that because you are dividing proceedings into two types, the regulatory type of proceedings, which Mr Hutley had described broadly as public proceedings, and the proceedings which you say the appellants are ultimately aiming to bring, which are private proceedings?  Does your submission ultimately depend upon a distinction between the public and the private?

MR IZZO:   I think that is a fair observation about it, your Honour.

EDELMAN J:   How do you then deal with the fact that, for about 300 years, private actions for breach of director’s duties have been described as, in part, public?  It goes right back to Lord Hardwicke in the 18th century.

MR IZZO:   The difficulty, with respect, is that the labels ‑ and the reason I am a little hesitant to adopt them – do not tell you a lot about the characterisation for the purposes of the end of this power.  So to say that a proceeding for breach of director’s duty as a public aspect is no doubt true in certain respects and there is no doubt that proceedings of a private nature can have a public aspect if the public might somehow be interested in them, but that is not the test, in our submission.

The test is not something that matters to the public; it is not something the public might be interested in.  I will come to the comments of Chief Justice Gleeson in Murphy which we submit are being misread in that respect.  The test has nothing to do with such broad notions and it could not because it would become very difficult to apply.  No doubt what your Honour has referred to as a description of director’s duties is helpful in some context but, if it is the discrimen according to which one judges whether something is an end which is permitted by the power or it is not, it is just not, in our submission, with respect, very useful.

The concepts which we submit are the correct ones are, however, with respect, useful:  first, the notion of aiding the external administration brings with it ‑ in effect, your Honours probably do not need to decide now – concrete notions, for reasons we have outlined at paragraph 6 of our outline, of understanding whether the action is apt to establish and adjust the rights and liabilities of the company, its creditors and contributories inter se, because that is just what any external administration is doing.

That concept has a degree of certainty to it.  Again, the bringing of regulatory proceedings – it is quite interesting if one looks at where this comes from.  Sir Anthony Mason’s statement in Hamilton v Oades is incredibly specific.  In fact, I will go to it now.

STEWARD J:    Just before  ‑ sorry, Justice Gageler, you go first.

GAGELER J:   Thank you, Justice Steward.  Mr Izzo, I just wanted to ask whether your two identified permissible purposes overlap, that is one part of the question, and the second part of the question is, in your paragraph 4, where you identify the first permissible purpose as:

to aid persons who are responsible for the external administration of a corporation in carrying out their duties –

do those persons encompass ASIC?  If they encompass ASIC, do they or do they not encompass persons authorised by ASIC?

MR IZZO:   That is a lot of – it covers ‑ ‑ ‑ 

GAGELER J:   Sorry.

MR IZZO:   ‑ ‑ ‑ …..of what I want to deal with today, your Honour.  I will deal with all of them.

GAGELER J:   I am happy for you to deal with it in your own course.

MR IZZO:   Yes, thank you, your Honour.

GAGELER J:   You started off by telling us we are not concerned with the first purpose.  I cannot accept that.

MR IZZO:   Well, and I do not say totally irrelevant, because it is plainly relevant to the sorts of issues which have been canvassed just now.  The point I was endeavouring to make is that the way the appellants pitch their case is that they are within the second purpose.  They say the second purpose is to bring proceedings against anyone in connection with the examinable affairs of the company and, as your Honours know, and Justice Keane pointed out, the “examinable affairs” is almost anything in relation to the company.  So, in effect, what they are saying is that their second purpose is to bring any proceeding against anyone in connection with the company, provided one goes through the not difficult gateway of examinable affairs.

EDELMAN J:   Although, Mr Izzo, it seems to me that on your approach, no person would ever seek authorisation from ASIC to conduct an examination, because unless that person were themselves a regulator, that person is never going to have a regulatory purpose.

MR IZZO:   Quite, and we do not shrink from that outcome, and I wanted to take your Honours to some of the case law on authorisation because it makes very clear that the functions of authorisation, the function of authorisation, a very different function to the function ASIC performs when it conducts an examination as an eligible applicant, they are entirely different functions, and we do not accept what our learned friend was putting yesterday, that the person who is authorised by ASIC is somehow assimilated to ASIC’s role, or somehow performs the functions of ASIC.

Your Honours will find the very distinction I have just drawn, that is, that for all intents and purposes, it is going to be pretty much just ASIC – I mean, there could be others, there could be a prosecutor, could be – there is reference in Re Excel to a royal commissioner, although there might be difficulties with judicial power there, so one can certainly conceive of, as your Honour Justice Edelman said, other regulators who are not in the Act but who might get eligible applicant status from ASIC, but we do say it is correct that in the main, the persons who are going to be authorised…..applicants will be acting for the first purpose.

That emerges very clearly from Re Excel, which points out - and I will take your Honours to it - that the whole point of this authorisation is very much just to act as a filter, and people like contributories and creditors, who always had standing under the old law, when there was not an express restriction, it was just a matter of the court deciding who has standing at common law to bring such an action or not so much common law, but who has standing to bring an action under the statute always included previous contributories. 

The point made in Re Excel is that the – so far as concerns of creditor and contributory, all the authorisation process does is preserve that historical position which enables – and in the usual course, a creditor or contributory will always be authorised.  But authorisation is not saying anything, in our submission, about the purpose of the person who is authorised.  Typically, they will only – once they come to take out the summons – be acting for the first purpose.

STEWARD J:   Mr Izzo, can I ask a question which you do not have to answer now, but you may address it in the course of this morning?  For the purpose of evaluating the two purposes and your expression of the second purpose, how are we to bring all that back to the fact that section 596A is a new provision which was a legislative reaction to a Harmer report recommendation that there would be no need for a court order, that we have a mandatory power which prescribes that a limited class of people may examine a limited class of people…..company and we have an explanatory memorandum which says the issue of such a summons is to be a formality. 

Why do we shackle this power with the observations of Sir Anthony Mason in relation to a predecessor provision expressed in different language and not reflecting the fact that the Harmer report postdates us?  You do not have to answer that now.  You may answer it in the course of - I do not want ‑ ‑ ‑

MR IZZO:   Can I give your Honour ‑ ‑ ‑

STEWARD J:   In other words, I would like to see how we can anchor this in either the language of the section or in some extrinsic material relating it.

MR IZZO:   I will come to the language of the section immediately because that is where I want to go with Hamilton v Oades, but to answer your Honour’s question as to why we should be shackled by it, there are a number of points that we would make.

First, as our friends accept, the mandatory nature of the power does not mean that the doctrines of abuse of process do not apply.  I think your Honour Justice Steward – it may have been your Honour who drew the analogy yesterday – it is a little bit like a subpoena, or indeed a proceeding.  They are all things that can happen as of right.  No one says that just because you could issue a proceeding in the court as of right, that principles of abuse of process do not apply to the proceeding. 

Likewise, just because you can issue a subpoena as of right, no longer in the Federal Court but at least in many other courts, it does not mean that you cannot set aside the subpoena for abuse of process.  So, we say the mandatory nature of the power makes no difference.  Secondly ‑ ‑ ‑

STEWARD J:   Before you go on, then the question really is, does the examination that is proposed here, at the purpose of it, which we all – it is all accepted – why is it foreign to the power – it might have been foreign to section 541 of the Companies Code or section 115 of the Companies Act of England, but why is it foreign to this power?  I am sorry to ‑ ‑ ‑

MR IZZO:   Not at all, your Honour - for the simple reason that if we are right about either of the purposes – the ends – perhaps I will call them the end or result permitted to be achieved by the process, to invoke the language in Williams v Spautz - if we are right about the two ends for which we contend, the action which the appellants propose to bring cannot be characterised as being brought to secure either of those ends. 

That is why the real issue in this case, as we understand it, is how one formulates this second purpose.  Is it as broad as our friends say in appeal ground 3, or is it confined, as we say – and as I am going to suggest to your Honours, the authorities say – and I will take your Honours through them – to regulatory proceedings.

So, in an attempt to do that, can I go to Hamilton v Oades because it is a starting point for this simple reason but first judicial articulation of the second purpose – there are cases going back a hundred years talking about the first purpose – that is assisting the winding up of a company – although we all know now it is broader than just the winding up.

But as for this second purpose, can I go to, in the folder of authorities, page 487, and I think your Honours were taken to this yesterday, page 487 in the folder, the page in Hamilton v Oades is 496, and in the passage your Honours were taken to yesterday, at the bottom of the page, there is the reference to:

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.

Can I emphasise that language, because a submission I am going to make is that when Sir Anthony Mason is saying that the first purpose involves protecting the interests of creditors, it is that language that Chief Justice Gleeson is evoking in Hong Kong Bank v Murphy in a passage which our friend contends assists them.  So I will elaborate that when I come to Hong Kong Bank, but the point I just wanted to make at the moment is that Sir Anthony Mason’s conception of protecting the interests of creditors is, in effect, securing the assets of the…..benefit in the winding up.  Now, the other purpose:

is to enable evidence and information to be obtained to support the bringing of criminal charges in connexion with the company’s affairs –

The first comment I make about that is that, coming back to what I have attempted to emphasise as the need for concrete purposes, or ends, this purpose is incredibly concrete and specific, and it is confined in a manner that is very difficult to make it stand with the proposition which our friends contend in appeal ground 3.  The way Sir Anthony Mason gets to that second purpose is found in what follows.  His Honour refers to subsections (2)(a) and (b), and I will take your Honour to them in a moment, in the judgment, and he says:

The examination is designed to elicit, among other things, evidence and information relating to the question whether the witness “has been, or may have been, guilty of fraud, negligence, default, breach of trust, breach of duty or other misconduct in relation to” the corporation.

I emphasise the word “misconduct”.  Everything that is listed there is a species of misconduct having regard to the way the phrase is formulated.

Now, your Honours will see where that phrase appears in the Code, page 492 of the judgment, and it is subsection ‑ the section is set out, subsection (2A), and the last line is at 2A.  Now, what we observe is that if your Honours compare 596B in its present form, the language is relevantly the same.  It is not exactly the same because the references to breach of trust and breach of duty and so on have been removed.  But if you look at 596B(1)(b)(i) that – I am sorry, your Honours, that is folder A, page 1 if your Honours do not have it ‑ the Act now refers solely to misconduct in relation to the corporation.

Now, it is not relevantly different because, as I have said, what Sir Anthony Mason was referring to were all classes of misconduct and the significance of that word is this.  That while one can accept that things like negligence, default, breach of trust, breach of duty, have a resonance in actions for damages – let us call them private actions, if we must – actions for damages brought by individuals, the word misconduct is a very different and much more specific label and it is the catch all label that is used.  And the point of it, in my submission, is this, that misconduct is the very word which invokes what we refer to as the regulatory purpose. 

In Hamilton v Oades Sir Anthony Mason only saw it as a criminal matter.  That is addressed by us in our written submissions, and I will not take your Honours to the detail, but the short point is that at that time, either before the advent of civil penalty regimes ‑ and in our written submissions at paragraph 17 we deal with that fact, the introduction of civil penalty regimes and some of the history by reference to the argument in ASIC v Hellicar to give your Honours some of the context.  That is paragraph 17 of our written submissions.

So, at that point, what most of us would today think of regulatory purpose, that is, the civil penalty proceeding in this context, was not yet in use at all and Justice Haydon tracked in ASIC v Rich the move from a criminal to a civil penalty regime.  But at the time Sir Anthony Mason was writing, one really only had ‑ for practical purposes, there were exceptions ‑ one really only had the criminal aspect, but the identification of that purpose by the Chief Justice comes from the words he quotes, and those words, we say, are not relevantly different to what one finds in 596B today. 

STEWARD J:   Mr Izzo, but they are not in 596A.

MR IZZO:   Your Honour has finished my sentence.  These provisions need to be read together, in my submission.  That is what Justice French did in Highstoke and his Honour undertook, in effect, a converse approach by reading 596B by reference to 596A.  Your Honours see that in Highstoke, which is in the folder at – it is, relevantly, page 799, and his Honour Justice French at paragraph 85 was dealing with a different issue, which is how you arrive at the first purpose – I am sorry, his Honour was not expressly dealing with it as a purpose, of course, his Honour was concerned with the question of whether this power can only be exercised in an external administration.

But as your Honours will note from proposition 4 in our outline, what his Honour says there is very useful to understanding why this first purpose is grounded in the text, context and history of the statute.  In that regard, at paragraph 85, his Honour draws – not only did he draw no distinction between 596B and 596A, but he points out that the textual considerations which affect 596A have to be, in effect, used to understand the scope of 596B. 

We say that makes perfect sense when these provisions are obviously operating together, the one subject to the other.  There is, in our submission, no difficulty in applying the same analysis and looking at 596B and, indeed, any other provisions which assist, to understand the end for which 596A might be used.

We would say the only difference in 596A is that it is, of course, understandable that where you have someone who was an officer in the last two years that you do not have to go through the extra hoop of showing, at some level, that there might be wrongdoing because it is something you are naturally going to be interested in and looking at, for an officer, but it does not mean that you are any the less concerned with the question of misconduct just because you are examining someone who was an officer in the last two years as opposed to someone for whom you have to show that there might be misconduct before you can examine at all.

The next decision I want to deal with is Evans v Wainter because it is relevant in two important ways.  One, our friends say it supports their appeal ground 3; two, conversely, we say it supports our characterisation of what I have called the second purpose.  There are just a couple of passages that I want to show your Honours.  Evans v Wainter is at page 729 of the folder of authorities, 145 FCR 176.

Just to remind your Honours, what our friends get out of this is the proposition one sees at page 770 at paragraph 3.4 and I think our friends said to your Honours yesterday that paragraph 3.4 is the modern development of Sir Anthony Mason’s second purpose.  Your Honours will notice that it corresponds word for word with appeal ground 3.

Our submission is that, if one looks carefully at Evans v Wainter, at the discussion that precedes this, paragraph 3.4 is not saying that the purpose there set out is one of the ends for which the examination power may be used.  In fact, Evans v Wainter is talking about what I have described as the regulatory purpose.  Can I explain how we get to that.

First, and I will not take your Honours through the detail of it, a large portion of Evans v Wainter is concerned with explaining why the holding in Re Excel, which we have set out in our outline paragraph 7, is right.  Not only is it right but it is still good law.  That is what Justice Lander seeks to establish and he reaches that conclusion after a long discussion at paragraph 194. 

I will not go through that in any detail, but it is important to bear in mind that that is the view his Honour reached – that is, the purpose in seeking the examination summons must be in the interests of the corporation, its creditors or contributories.

Then there is a different discussion a couple of pages over at 217 to 222.  It is this discussion which is actually, we say, the modern development of Sir Anthony Mason’s second purpose and it is this discussion which we say feeds into proposition 3.4 at page 770.  At paragraph 217, page 764, Justice Lander says:

The power is not given for the purpose of enabling a third party to examine that person to determine whether the person has been guilty of misconduct directed to a third party.

The distinction is between a third party in 217 and in 218 the person’s conduct in relation to the corporation.  Then at 219 he quotes from Sandhurst Trustees v Harvey and in the second sentence of the quote Chief Justice Doyle refers to what I have described as the two purposes.  First he says, second sentence:

to enable inquiry 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) –

That is the second purpose:

or which might provide information that will advance (in a broad sense) the external administration –

That is the first purpose.  Jumping to the next paragraph, the second‑last sentence, still in the quote:

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.

Justice Lander agrees with that in 220, and puts the matter this way, second sentence:

Particularly, I agree that the discretion conferred by s 596B is to provide information to an eligible applicant, in the case of ASIC, with a view to exposing misconduct and, and in the case of other eligible applicants, to provide information that will advance the external administration of the corporation.

Now, that may be too narrow insofar it excludes the possibility that there might be other people who, like ASIC, might have a regulatory purpose, but the idea is, we say, straightforward, that when one is talking about the civil or criminal sanctions to which Chief Justice Doyle referred in the quote, that is an ASIC matter.  It is a regulatory matter, a regulatory function, and that is what ASIC will be doing if and when it conducts examinations.  But it is a very different position if one is looking at other eligible applicants because, we say, at least one would expect that in the main they are going to be concerned with the other purpose, which is aiding the administration of the company.

Now, it is that discussion that, we say, ultimately feeds into proposition 3.4.  We accept that, as expressed, proposition 3.4 on page 770 is much broader than that, but, of course, this is not a statute, and one has to read Justice Lander’s summary in context, and if you look at both 246 and 247 on the previous page, which confirm the correctness of Re Excel, and the need for a benefit, and also propositions 8 and 9 on page 770, it is clear that, so far as concerns the first purpose, Justice Lander is not departing at all from Re Excel or the need for a benefit, and what 3.4 must be about…..matters to which I have taken your Honour, which is what I have described as the regulatory purpose.

Now, there are one or two other cases which our friends referred to which support their broader conceptions of the second purpose, and I do want to go them to explain why they do not, in fact, do so.

First, or next rather, Palmer v Ayres.  My learned friend, Mr Hutley, referred to Palmer v Ayres yesterday and said that statements in Palmer v Ayres about the purposes of 596A are not limited to civil penalty proceedings.  The reason that your Honours find no reference in Palmer v Ayres to civil penalty proceedings is that if one looks at the paragraph to which Mr Hutley was referring – Palmer v Ayres is in the folder of authorities, page 509 and my learned friend, Mr Hutley, took your Honours to paragraph 30 on page 522, but one has to read that in the context of paragraph 29 where the plurality said:

The application under s 596A was made by the Special Purpose Liquidators to aid the performance of their statutory functions and powers; first, to establish what are the assets of the corporation, including whether there are rights and obligations that could be realised, secured or litigated for the benefit of the unsecured creditors generally; and secondly, to get in all of those assets.

We say that paragraph is self‑evidently only about what I have described as the first purpose and we note it supports our construction of the first purpose as being concerned with procuring a benefit to relevantly the creditors by bringing in and identifying the assets of the company.

One matter of significance there is that if one looks at the discussion at paragraphs 30 and 31, it is clear that the sorts of rights and liabilities that the plurality contemplated would be identified and established, are rights and liabilities of the creditors and company inter se, not rights and liabilities of the contributories as against some third party.  It is entirely consistent with the notion of an external administration being concerned to adjust the rights of the company, its creditors and contributories between them.

The short point is that paragraph 30, and indeed nothing else in Palmer v Ayres support – nothing there supports our friend’s proposition that an individual can permissibly examine in aid of any proceedings, because if one looks at 30 and 31, the only rights and liabilities that are spoken about are rights and liabilities owed by – or owed to – the corporation.  So, it certainly does not support my learned friend’s view as to the scope of any purpose, whether the first or the second.

Secondly, it does not undermine our approach to the second purpose.  The fact that civil liability proceedings are not referred to is neither here nor there.  Criminal proceedings are not referred to either.  It is simply not engaging, because the judgment did not need to engage, with any second purpose, to the extent that one could say it exists.  So we say Palmer v Ayres does not assist our friends. 

Rees v Kratzmann is another decision which our friends call in aid.  Can I go very briefly to that.  That, again, is in the folder.  It begins at page 549.  Now, going through to page 564, our learned friends ‑ ‑ ‑ 

KIEFEL CJ:   What page of the report is that, Mr Izzo?

MR IZZO:   I am sorry, your Honour, it is page 78 of the report, and your Honours were taken to that page, and your Honours were also taken to page 80 of the report, which is 566.  If I can go to 566, because my friend emphasised, on 566, that is page 80 of the report, the reference at about point 7 to:

The honest conduct of the affairs of companies is a matter of great public concern to‑day.

The point we wish to make is that that observation is not one which is capable of – is not one which supports the articulation that our friends advance of this second purpose.  The reason for that is that, when one looks at what Sir Victor Windeyer is saying in context, one must start, on page 79, at about point 5, with the one place where his Honour does identify the purpose of the examination procedure, and that is in the sentence, as I say, about point 5, it says:

The boundaries of the discretion are admittedly not defined.  But the purpose of the inquiry is to gain information that may be relevant for the proper conduct of the winding‑up of the affairs of a company in relation to which there are prima facie grounds for thinking that some fraud has been committed or some material fact concealed.

Now, that precondition is, of course, because of section 250, which was then the only section dealing with public examinations, but the conception of the purpose of the inquiry being to gain information that may be relevant for the proper conduct of the winding up is, of course, a notion relevant to what I have described as the first purpose.  His Honour was not articulating, and as I have said to your Honours, we have not found articulated before Hamilton v Oades anything resembling some second purpose.

When his Honour talks on the next page about the honest conduct of the affairs of companies, his Honour is dealing with a question of construction of the statute as to whether the question that arose in that case was whether the subject matter of the examination is limited by the matters set out in the liquidator’s report which are the precondition to there being an ability to invoke a section 250 examination.  And his Honour started with the assumption at the top of 80 that there is a common law “objection to compulsory interrogations” which might lead you to narrow the scope of the power, and then said as a matter of construction there are other considerations which point the other way.

That is all his Honour was doing.  His Honour was not attempting to articulate in purpose or any other purpose, and as I have said the only purpose we find articulated in the judgment underlying the examination power is that on page 79.  So, we do not think that that case supports our friend’s argument.

There are two other cases I wish to mention.  One is Re New Cap Reinsurance, which is the decision of Justice Santow to which your Honours were taken.  That is at page 873 of the folder of authorities.  And my learned friend took your Honours to paragraph 12 of the judgment which, in the last couple of lines at the top of page 888 talks about “augmenting or protecting the assets”.  That is the first purpose.  And then he drew attention to a “wider statutory purpose” in paragraph 13, and then down in paragraph 15 articulated the two purposes in terms that are very similar to what one sees in Sandhurst Trustees v Harvey in that paragraph that I took your Honours to in the judgment of Chief Justice Doyle that was in turn quoted in Evans v Wainter.  It is the reference to either assisting “the liquidation” or to:

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. 

In other words, what we described as the regulatory purpose. An important point, however, to be made about this judgment, is that which occurs at paragraphs 18 and 19. It is important to bear in mind that this was a case concerned with access to the records of an examination. That is, access to the transcript, which your Honours were told yesterday is available under section 597(14) of the Act. And Justice Santow was astute to distinguish a case of that kind from a case where the question is whether the examination itself is brought for a proper purpose. And at paragraph 18 he quotes from Justice Whitlam in GPI Leisure Corporation:

expressly disagreed “with any suggestion that the examination provisions of the Law may be utilised by a liquidator solely to assist a creditor who is pursuing his own interests unconnected with the winding-up”.

And at paragraph 19 he drew that distinction between:

whether the liquidator ought to carry out an examination, as distinct from making its product available and where that purpose of the examination was not the beneficial winding-up of the company but merely to assist third party creditors ‑

and in the second sentence, that situation is:

distinguishable, because the situation before me is concerned not with the propriety of the liquidator seeking to carry out a future examination ‑

but the examination has already taken place.  So, there are limits to the extent to which this judgment takes the matter further at all, because it really is a very different question when you are dealing with the product of the examination as opposed to whether you should conduct it in the first place, and that is understandable because under the Act the product, as your Honours were told yesterday, is available to anyone who wants to pay for it on payment of a fee.

Our submission is that that just does not help your Honours understand what the permitted end in conducting the examination in the first place is.  It is one thing to say that once you have done it for a permitted purpose you can use the transcript for a whole bunch of reasons and give it to anyone who is happy to pay the fee, but that public access, and that openness, cannot answer the anterior and much more confined question of why you can conduct it in the first place.

The last decision I wanted to take your Honours to in dealing with these matters as to – the last decision that is relevant that our friends relied on as relevant to their articulation of the second purpose is Hong Kong Bank v Murphy 28 NSWLR 512, on page 808 of the authorities. Our friends emphasise page 521 of the report and drew your Honours’ attention to the third last sentence, at about F, that says that those purposes – that is:

the purposes for which the power to order examinations . . . is conferred.  Those purposes include the protection of shareholders and creditors and of interested members of the public.

Our friends rely on that statement to suggest that their formulation in appeal ground 3 is correct.  There are two difficulties with that.  The first is simply that the statement of Chief Justice Gleeson is certainly narrower than the breadth of the formulation in appeal ground 3 which extends to, in effect, any proceeding in relation to the examinable affairs of the company.

But the second point is this, that the Chief Justice was not talking about, we submit, the second purpose.  This was a case, whereas our friends were at pains to point out yesterday, the only issue – and one sees this from 519, C to E ‑ the only issue was whether we were within the first purpose stated in Hamilton v Oades.  The Chief Justice refers to what Chief Justice Mason described as that first purpose in Hamilton v Oades at 519C, and then talks about benefit in D, E and F.

Those concepts are squarely within the concept of aiding the external administration of a company.  They have nothing to do with some broader purpose, whether it would be bringing any kind of proceeding, which is what our friends contend for, or bringing a regulatory proceeding, which is what we contend for.

Our friends place weight on the word “protection”, but as I have endeavoured to show your Honours when looking at Hamilton v Oades, the way Sir Anthony Mason used that word in Hamilton v Oades was about protecting the creditors’ pecuniary interests in ensuring the assets were brought in.  We suggest that is exactly what the Chief Justice was talking about here, because he talks about protecting the interests of creditors, shareholders, and interested members of the public. 

We have explained in our written submissions at paragraph 28 why the reference to interested members of the public has a bespoke meaning here, because this was a case where the unitholders in the estate mortgage trust were neither creditors nor shareholders of the trustee that had been removed.

They were not creditors because, as we indicate in the reference we give at footnote 4 at paragraph 28, a beneficiary under a trust does not have a right to payment of any specific sum, they can only secure replenishment of a trust fund, and so the idea was that people really in the position of creditors, namely, the unitholders, are those whose interests are protected by securing assets for the benefit of the trust.  The reason his Honour referred to them as members of the public was because of the size.  The point that his Honour made, at page 515 of the report, at G, it attracted:

investment from members of the public.  Approximately 52,000 people –

but his Honour is not referring to members of the public generally, he is referring to those who handed over money and wanted to get money back, and the interests that were being protected were their interests in getting a return.  It is because of that that his Honour drew the analogy to the role of the liquidator. 

So the case just does not support the notion that there is some broader concept of protection of the public that could justify an examination, and even if it did, as I have said, that is not the discrimen that our friends apply, because they do not say that the purpose in appeal ground 3 must be one that protects or benefits the public.  What they say is that any proceeding can be brought.  That formulation cannot be justified, as I have endeavoured to show, by any of the cases to which I have referred.

Now, there are two other significant matters that I need to deal with. One is the question of the role of – the significance of ASIC authorisation, and that is dealt with at paragraph 9 of our outline - I will come to that now - and the second issue I need to deal with is the range of provisions that our friends refer to in connection with what we think our friends say is some assimilation of the role of authorised person to the role of ASIC, and that they are the matters at paragraph 12d of our outline, including section 13J of the Corporations Act to which Justice Edelman referred yesterday.  So I am going to deal separately now with those two matters.

The notion that a person authorised by ASIC as an eligible applicant is in some way assimilated to ASIC, or is performing ASIC’s functions for it, is one which, we submit, cannot be accepted for three reasons.  I will tell your Honours what they are and then develop them.  The first is there is extensive authority dealing with the nature of the role ASIC performs in authorising a person to be an eligible applicant. 

That authority makes it clear that the decision to authorise a person involves – can involve no inquiry, in most cases, into the purpose for which the eligible applicant is acting.  It is a very confined role that is largely directed to understanding the relationship of the applicant to the corporation, and, in most cases, where the applicant is a creditor or contributory, authorisation is expected to be given as of course, as it historically has been. 

The second problem with the submission is that there are very real practical reasons why ASIC’s authorisation could not resolve an issue as to the purpose of the applicant, and I will explain those practical reasons in part by reference to the facts in this case.  The third problem is this, that the submission conflates the role of ASIC in authorising a person to be an eligible applicant, the role of ASIC in obtaining a summons itself, and it is very important that those two roles be kept separate.

Can I deal then first with the nature of the authorisation exercise and this was dealt with at length by the Full Court comprising Justices Gummow, Hill and Cooper in Re Excel and has been picked up under the current provisions in two subsequent cases, Ryan v ASIC and Saraceni v ASIC. So, although the discussion I am about to take your Honours to was dealing with section 597 of the Corporations Law, a subsequent Full Court in Saraceni and Justice Gyles in Ryan have both said that it is the correct analysis under the present provisions as well.

Can I pick it up, Re Excel in the folder of authorities, page 837, the citation is 52 FCR 69. This was a case where there was a challenge to both the ASIC authorisation decision by way of judicial review and a challenge to the issue of the summons by way of an application to set aside of the kind that your Honours are concerned with today.

What is important for present purposes is the discussion of the application for judicial review of the authorisation decision, and that commences, relevantly, at page 81 of the report, page 849 of the book and it is under the heading “The appropriateness of judicial review proceedings”.  The issue was summarised at about F.  A submission had been made that you could not bring judicial review proceedings to set aside the authorisation because as a matter of discretion one would not entertain an application for judicial review where the same issue can be resolved by the separate application that was already before the court to set aside the summons.

It is that submission which the Full Court is dealing with here.  In the paragraph at the bottom of page 81 of the report it identifies that implicit in that submission is an assumption that would arise on judicial review of the authorisation and on review of the registrar’s order to grant the summons would be identical and the Full Court said:

With respect, we do not agree.

At the bottom of the page, the last sentence they talk about a “two stage procedure”.  The first stage, going over the page, is where the applicant who “is not the Commission” or one of the people who are in the Act is for “authorisation by the Commission”.  And then down at E:

the second stage of the procedure is an application by the authorised person . . . to the Court –

And then, jumping two sentences:

The question at issue in the first stage would be whether the prospective application –

should read “applicant”:

seeking authorisation is an appropriate person for the Commission to authorise . . . That question will require consideration of the relationship which that person has to the corporation –

Jumping a sentence:

The Court, in deciding whether to grant the examination order, may take into account different matters, specifically matters concerning the relationship between the examinee and the corporation as well, in an appropriate case –

And running down to the end:

the purpose of the applicant in seeking the examination order.

And the significance of this comes out at several points.  So if we go over the page to 83B, the second sentence in that paragraph:

A challenge going to the appropriateness of an examination order being issued in respect of a particular examinee, which may encompass a question of the purpose of the applicant for examination will, of course, be appropriately raised before the Court in the review of a decision to grant an examination order.  It will ordinarily not arise for consideration in relation to the validity of the authorisation.

Now, one of the reasons why that is so is explored at paragraph F, down the bottom of the page.  It is the last two sentences, where the court is dealing with a submission that the authorisation has to be limited to particular people, and the court points out that there is no such limitation – this is the last two sentences of F – there is no such limitation in the Act.  And it looks at the Act, it is extraordinarily broad, because a person can be authorised – and this was the case under 597 as it is under the definition of “eligible applicants” in section 9, you can be authorised generally in relation to the section, or in relation to the particular corporation.  The point is made, down the bottom of 83:

The Commission, in determining whether to grant authorisation, will consider the relationship which the person seeking authorisation has to the relevant corporation and the external management . . . Contributories and creditors would normally have the appropriate connection with the corporation (as the history of examination orders, already set out, demonstrates) –

Down at D, the point I have just made is picked up, the second sentence:

Where the subsection refers in the plural to applications under the section it is referring not to applications under the section made in relation to a particular corporation, but applications that may be made more generally.

And the difficulty with that, of course, is that one has no idea of knowing, particularly if you can grant authorisation generally, not confined even to a particular corporation.  One has no way of knowing anything useful about the particular examination.

KIEFEL CJ:   That might be a convenient point for the morning adjournment, Mr Izzo.

MR IZZO:   Thank you, your Honour.

AT 11.18 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.36 AM:

KIEFEL CJ:   Yes, Mr Izzo.

MR IZZO:    Thank you, your Honour.  I can tell your Honours that I expect to be done by lunch, so there should not be any difficulty finishing.  There was one more passage I wanted to take your Honours to in Re Excel.  It is page 86 of the report, page 854 of the book. 

Your Honours were taken here yesterday by my learned friend, Mr Hutley, to the passage at paragraphs B and C, where reference was made to the two purposes in Hamilton v Oades, and at C where, in the second sentence, the Full Court pointed out that the second of those purposes has no application in this case.  I wanted to take your Honours down to E because, bearing in mind that this is still in the portion of the judgment dealing with the challenge to ASIC’s authorisation, the Full Court made the point that:

while the purpose of examinations ordered to take place under s 597(3) –

that is, the issue of the summons:

may be so stated –

in other words, by reference to Hamilton v Oades:

the role to be played by the procedure of authorisation –

which at that point was contained in subsection (1):

is much narrower.  It is to the subject matter, scope and purpose of subs (1) to which attention must be given to resolve the present question –

that is, the judicial review application:

not the subject matter, scope and purpose of subs (3).

Which is about the issue of the summons.  Then the Full Court said at F:

As we have already noted, the grant of authorisation under subs (1) does no more than confer standing ‑

Skipping down a few lines:

the decision-maker . . . will be required only to consider the relationship which that person has to the external administration and in a particular case the appropriateness of that person being given standing ‑

Here the challenge was to the standing of a receiver and the court pointed out over the page, at the top of page 87, the first full sentence:

This points up the fact that the receiver is acting for a creditor and it is undeniable that a creditor, in an appropriate case, would be a proper person to obtain approval.  A creditor has an interest in ascertaining the assets of the company and their location, as well as to ensure that if assets have been misapplied they may be recovered for the benefit of the corporation.

And this applies whether the creditor is secured or unsecured, which answers a point my learned friend, Mr Hutley, made yesterday that this notion of benefit does not apply to receivers.  That is just not the case.

The point being made here is that when you are dealing with a challenge to an authorisation, as is clear from the passages I have taken your Honours to, the question of purpose is not typically relevant and all you are looking at is the relationship, and if you are a creditor or contributory, you will generally be in…..and this case shows up the distinction because the Full Court dismissed the challenge to the authorisation but allowed the challenge to the decision below in relation to the issue of the summons.  As Mr Hutley pointed out, they did not set aside the summons, but they said the question – the facts raised the possibility that the purpose was improper because there was no benefit to the company and so the issue had to be explored.

But the point I am making is that this classically illustrates how a ground that is available to object to the issue of the summons, or set it aside, namely the question of purpose, is not available to challenge the authorisation, for the simple reason that the authorisation tells you nothing about the applicant’s purpose, because that is not what ASIC is required to look at.

Now it may be that in some cases they do, and it is certainly the case that in the case statements were made to ASIC about the applicant’s purpose, but it is not sufficient to say that just because that may happen that the mere administrative act of conferring standing by granting authorisation has any legal significance in approving or stating anything about the applicant’s purpose.

That analysis was picked up in Ryan v ASIC, which is the case that my learned friend mentioned yesterday. It is in the book at page 897, 158 FCR 301. Justice Gyles, in that case at paragraph 40, page 314 of the report, page 910 of the book, said, paragraph 40, second sentence:

The discussion by Gummow, Hill and Cooper JJ in Re Excel 52 FCR between 79 and 88 explains the difference between the authorisation decision, on the one hand, and the issue of the summons on the other ‑

His Honour then quotes from some of the passages I have taken your Honours to and, at paragraph 41, says:

In my respectful opinion, those statements remain apposite notwithstanding the amendments to the provisions.  The two-stage process remains –

and he points out:

It should be noted that historically any contributory could apply for an examination order.

He then uses that at paragraph 50 to answer the submission in the third sentence:

It is submitted that there was no analysis in the memorandum –

on which ASIC acted – on which the delegate acted:

of the realistic possibility of there being any benefit to the company.

And the answer to that submission is the first line of 51:

This argument ignores the difference between the two stages of the process ‑

In other words, benefit to the company which is a question of purpose just cannot arise when you are dealing with authorisation.

Now, I will just give your Honours a reference as well to the other case in the Full Court which has applied the analysis I have just mentioned.  In Saraceni v ASIC, it is mentioned in our outline paragraph 9b, 211 FCR 298, and we refer your Honours to paragraphs 106 to 109, from 151, it adopts the same analysis to the present form of the provision. So, that is the law on what the authorisation is so far as it has been established in the Full Court of the Federal Court over a number of decisions.

The second aspect I wanted to…..was the practical aspect, that is one just could not form a view about purpose, let alone whether it is permissible, in the context of the grant of an authorisation because, as I have endeavoured to point out in going through Re Excel, the authorisation need not be limited to a particular examinee and, in fact, need not be limited to a particular company, although typically it will be in the second case , but certainly need not be limited to a particular examinee and ‑ ‑ ‑

STEWARD J:   Mr Izzo, in relation to the issue of purpose, what do you say we should get out of the fact that under 596C, Parliament has specifically required that a 596B application be accompanied by an affidavit, and not in the case of 596A.  For example, how would one test purpose if no affidavit was provided by an applicant?

MR IZZO:   Well, sometimes one can and sometimes one cannot, is the short answer.  So, it is a bit like an issue of a subpoena.  Or indeed the other example I gave, bringing a proceeding, instituting a proceeding for an improper purpose.  You may know nothing; you do not have to file an affidavit when you bring a proceeding in a court.  So, other than what is pleaded, you know nothing about the background, you know nothing about whether there is a collateral attack on another proceeding, whether something is res judicata.  All of these things you may or may not accidentally find out.

You may have a suspicion about it, in which case you might be able to get, as happened in Re Excel, access to correspondence and other documents which might record the purpose.  But the short answer, your Honour, is that structurally in the Act there is no guarantee that you will be able to work out what the purpose is in terms of the required documents.  But, as we have said in the subpoena, you may be in a position where you are able to allege it and bring the application. 

STEWARD J:   Why did Parliament decide to limit the need for an affidavit to B rather than A?

MR IZZO:   Well, in my submission, it is simply because if one is dealing with B one has to establish the facts in 596B, that is, that there is a basis to be satisfied ‑ sorry, that one has to satisfy…..of the potential involvement in misconduct of someone who was not an officer in the last two years, and it is a reflection of the judgment of course that those who were not an officer in the last two years should be given a little but more space and freedom from intrusion on the privacy of their affairs.

But the point is that because you have to establish those things you obviously have to do it in some way, and because it is not automatic, unlike 596A, it is only fair that the person against whom that is established have a requirement that the applicant be put to proof of those matters.  But, in our submission, that is just a practical consequence of the fact that there are additional and much more subjective, evaluative considerations in 596B than there are in A, which are just automatic things, you either were or you were not an officer.  You just do not need an affidavit.

Now, I was dealing with the practical problems in saying anything about purpose at the authorisation stage.  That problem is shown up in the present case because, if your Honours go to the judgment in the core appeal book at page 85, your Honours have at the top of 85 an extract from the letter to ASIC which sought authorisation and in that letter, in the last sentence of 60 is a suggestion that the pool of funds available to the company would increase.  In paragraph 9 there is a reference to:

nominated proposed examinees, none of whom were the subject of the ultimate examination order.

At 10, a reference to:

“[t]he purpose of the examinations would be to investigate the potential for claims to be made on behalf of creditors or shareholders –

Then at 11, the last line:

the application was made expressly for the benefit of shareholders and creditors of the company.

By the time we came to the hearing, that is, by the time the summons had been issued, the position was different because, as recorded at 26, the applicants:

accepted that they had no claim against Arrium as creditors, and any recovery by them against third parties would not reduce any such claim or improve the position of other creditors.

Now, that may be because of the barring effect of the DOCA, although I hasten to point out that there is no evidence as to why the applicants did not submit their claims in the DOCA, and in circumstances where there was not going to be any prospect of surplus assets in the liquidation.  That is something recorded at 23.  Given that the applicants are subordinate claimants anyway, one might well think that they did not submit a claim for the very good reason there would not have been any money to meet it.

But it does not matter why they did not submit a claim.  The point is they are not able to claim against the company.  But that position had only emerged as a position that the applicants accepted at a later point, that is, after the authorisation, because at the time of the authorisation they were telling ASIC that they were creditors and that they were going to improve the pool of funds available to creditors.

Now, I do not seek to criticise the appellants for that, all I am saying is that the state of affairs, or their understanding of the state of affairs, changed.  The other thing that changed is that paragraph 9 says the people they said they were going to examine were not the people they ultimately examined.  But it does not matter.  Had we sought to challenge the authorisation, we would have met the problems that the Full Court pointed out in Re Excel, it does not matter who you are proposing to examine because that is not something that has to be established, and typically it will not matter what your purpose is.

The point is that the time to work out whether a particular invocation of the process is improper is the time at which the process is invoked, because when you invoke the process to issue a summons against one director as opposed to another, or at a point in the chronology when your statuses change from creditor to shareholder alone, only then can you know whether the process that you have invoked, at the time you invoke it, has been properly invoked.  So that is why we say there are practical reasons as to why ASIC’s authorisation cannot really tell you anything useful about purpose.

The third issue is this, that the appellant’s approach conflates the functions of ASIC in authorising someone to be an eligible applicant with the statutory function of ASIC as an eligible applicant.  And they are different in important ways.  Justice French in Highstoke gave an explanation, this is in the book at page 797, in the report it is 156 FCR 501, page 525. Paragraph 80 of Highstoke:

The Corporations Act makes no express provision for ASIC to authorise a person to make an application under Pt 5.9. Its function in that respect is identified in the definition of “eligible applicant”. The function so identified is picked up by the general provisions of s 11(1) of the ASIC Act. The power to do whatever is necessary for the performance of its functions is conferred upon ASIC by s 11(4).

So, in other words, ASIC, in authorising someone to be an eligible applicant, is not performing some broader statutory function of the kind one finds, for instance, in section 13 of the ASIC Act. Section 13 of the ASIC Act enables it to undertake investigations to explore contraventions of the law. That is something it might do if it brings its own – if it seeks its own summons, but when it is authorising someone else to be an eligible applicant, it does not follow that it is doing that for any of its purposes. It is only doing it for the reasons Justice French says it has the function of doing it, (a) because it is implicit in the definition of “eligible applicant” that it has that function under the Corporations Act, and (b) because the power to do anything necessary for the performance of its functions is itself in the ASIC Act, and picked up by the general provisions in section 11(1) of the ASIC Act. And 11(1), so your Honours know, says:

ASIC has such functions and powers as are conferred on it by or under the corporations legislation –

In other words, that is all that is happening. It is nothing broader than that. There is, of course, a problem if one sees the eligible applicant as somehow performing ASIC functions, because there are provisions in the ASIC Act, for instance section 102, that I think we have sent up, which I do not need to take your Honours to it, but provide the process by which ASIC, by writing under its common seal, can delegate any of its functions and powers.

That is the typical effect and one might think perhaps the exclusive way in which ASIC can give someone else the ability to perform its functions.  It is certainly not, we say, what is happening, when ASIC is authorising someone to be an eligible applicant in performance of the function that is implicit in that definition. 

Can I come then to the statutory provisions to which my learned friend referred, and I think your Honour Justice Edelman picked up the significance of section 1317J of the Corporations Act, because it is of course the case that ASIC has rather bespoke and very significant powers under the civil penalty regime in Part 9.4B of the Corporations Act. They include the ability to bring a civil penalty proceeding in which a declaration of contravention can be made, and they include, as I think your Honour Justice Edelman pointed out, power under section 1317J, and I think we have sent that up because it was not in the book. So, we have sent up, if your Honours have to hand, a few provisions from Part 9.4B which were not in the volume of authorities. And I wanted to draw your Honours’ attention to a couple of matters.

First there are some definitions in section 9 which we have extracted at the front, and if your Honour sees the definition of civil penalty order, it includes a range of things which include “a declaration of contravention”, “a pecuniary penalty”, “a relinquishment order”, “a refund order”, “a compensation order”, or “an order . . . disqualifying a person from managing corporations”.

Now, it is true that one of those orders, namely the compensation order, overlaps, though narrowly, and I will come to the narrowness of the overlap, that overlaps narrowly with the action that the plaintiffs – that the appellants propose to bring.  It overlaps in this sense, that a compensation order is available to compensate persons affected by conduct in breach of the financial services provisions.  One of those provisions, or one or two of them – 1041H at least – might potentially be applicable to the appellants’ claim and so, to that extent but to that extent only, there is an overlap between the nature of the appellants’ claim and one of the orders that ASIC may seek.

Putting the matter in that way, in our submission, takes the compensation order out of context.  While of course a compensation order is function equivalent to a damages award, it exists only as part of a regulatory regime where the regulator has a raft of options and the regulator must make a regulatory decision as to whether, given the particular context, the public interest and whatever else is relevant, the regulator thinks it is sufficient simply to seek a declaration or to seek a declaration of pecuniary penalty order, or to seek a pecuniary penalty order and compensation, which is unlikely, one would think, or to seek compensation alone, or to seek one of these other bespoke orders.

The point is that the considerations that go into that decision are not just a question of:  is there loss arising from a contravention of the law?  There are many other considerations, such as:  is the conduct properly remedied by a fine rather than by compensation?  Does it need to be remedied at all or is a declaration sufficient to mark the conduct?

The role of ASIC is so much broader and more multifaceted and complex than the role of the appellants in seeking to establish that they have suffered loss that gives rise to a damages award.  They are just not analogous at all and the analogy cannot be drawn simply because an element in ASIC’s decision‑making is going to be whether or not it seeks a compensation order.

The other matter that I wanted to point out is that the narrowness of the overlap is quite significant because if your Honours go to section 1317H, which is in this bundle, the general provision for seeking a compensation order is limited because the order can only be made to compensate the corporation – that is, section 1317H(1).  It cannot be made to compensate other people.

There are peculiar orders – 1317HA, 1317HB, 1317HC and 1317HE, which, in the peculiar field of their operation can be used to compensate other people.  We accept that 1317HA might potentially be applicable here, but the overlap is very narrow indeed and it cannot justify a general proposition of the kind which our friends seek to have your Honours adopt, that our friends can examine for any proceeding they like, because that is how appeal ground 3 puts it.

They have to put it that way because the only legislative hook for their formulation is that the legislation does not impose any limits.  So the only way that they can formulate appeal ground 3 is in the way they have formulated it ‑ ‑ ‑

GAGELER J:   Mr Izzo, in the – I am sorry.  I did not mean to cut you off.

MR IZZO:   The only limitation is judicial power and they see no other.  So it has to be a proceeding, but they have no other limitation.

GAGELER J:   Mr Izzo, as I understand your argument, you accept the formulation of the legitimate purpose in appeal ground 3 if the word “regulatory” is inserted before “proceedings”.  Is that right?

MR IZZO:   Yes.

GAGELER J:   You took us very helpfully to Hamilton v Oades and Rees v Kratzman, in the first case Sir Anthony Mason and in the second case Sir Victor Windeyer, formulated a permissible purpose, as you pointed out, very carefully by reference to the statutory language as it existed in each of those cases.  How do you distinguish between your permissible purpose and Mr Hutley’s permissible purpose by reference to the statutory language with which we are now concerned?

MR IZZO:   The short answer, your Honour, is that we submit that the statutory language in 596B is not relevantly different to the language that Sir Anthony Mason was considering in Hamilton v Oades, which concerned section 541.  We accept, as Justice Steward pointed out, that there then involves a leap to say that the same must apply to section 596A, but we put that there is no reason for drawing a distinction between the two when the only distinction that exists is one that would, if anything, suggest that the same purpose should exist, because the only reason 596A has different preconditions is because it is meant to be easier to examine people who are officers in the last two years, they are the archetype of the person who might have committed an offence or breached a civil penalty provision that the regulator might be interested in.

So we do not see that as being an obstacle to applying the approach of Sir Anthony Mason, which is relevantly, at least insofar as concerns 596B, dealing with language that is to the same effect.  And, of course, we add, as your Honour understands, the addition of a civil penalty provision which, for the reasons we explain in paragraph 17 of our submissions, are the true analogue to the criminal proceeding with which Sir Anthony Mason was concerned.

EDELMAN J:   Mr Izzo, can I just unpack a little bit what you mean by “regulatory proceedings”?

MR IZZO:   Yes.

EDELMAN J:   Do you mean any proceeding for any purpose that is brought by a regulator?

MR IZZO:   Well, it may be that the words “for any purpose” would go too far, and this ties into something that Justice Gageler pointed out, that there is a potential for overlap, because a regulator might well be interested in undertaking an examination that is concerned with the first purpose, that is, in some way aiding the process of the administration in getting in assets, and, indeed, the regulator has particular roles in supervising the administration which could equally be used, and can be used, to aid the interests of creditors and contributories.

But the regulatory purpose is intended by us to evoke little more than what Sir Anthony Mason was doing, and that is, to seize on the language of misconduct and to say that embedded in that is a notion of contravention of the law.  It must be that to be judicial, to be judicial power and ‑ ‑ ‑

EDELMAN J:   Suppose then that the regulator’s purpose was solely limited to one of the particular provisions to which you have just taken us, like 1317HA, a provision designed ultimately to obtain a benefit for a third private party from the proceedings that are ultimately going to be brought.  Is that still a regulatory proceeding?

MR IZZO: In my submission, yes, but also that characterisation is not possible, and the reason it is not possible is that one does not get to 1317J unless one has made a declaration of contravention. You must do that before you can do anything else in Part 9.4B. And it is that process which, in my submission, underlines the broader regulatory exercise which is being undertaken when you do that because logically the first step is a declaration of contravention of the law and that feeds directly into section 13 of the ASIC Act, 13(1) of the ASIC Act.

One of ASICS functions, the first function identified, is to investigate contraventions of the law.  What you do about that is a second order issue.  And so that is why I am resisting to some extent your Honour’s characterisation as doing it only to indicate what I have called the second order issue and, obviously, it would be most unlikely, in my submission, that ASIC would have a view at the outset as to which particular regulatory remedy of the ones I have floated in the definition of civil penalty provision it would ultimately pursue. 

STEWARD J:   Mr Izzo, you refer in 596B to misconduct, and…..refer to (i), which echoes former 541(2)(b), I think.  What is the role of (i) in the light of (ii).  Would there be anyone who might fall in (i) who would not also fall within (ii)? 

MR IZZO:   Sorry, your Honour, who would fall in (i), but would – did your Honour say would not ‑ ‑ ‑ 

STEWARD J:   I suppose the question – I am sorry, I have expressed it poorly, I apologise.  What role can (i) have practically given the breadth of (ii)? 

MR IZZO:   I see what your Honour says.  Your Honour is quite right in the sense that if you were the applicant for the summons you would not try to get yourself through (i), although you might try to make it an even more compelling case because this is discretionary of course. 

The significance of (i), however, is that its very existence points up as a separate matter the significance of misconduct.  In other words, the very fact that you do not need to provide for it if you have got something as broad as (ii) rather indicates, we suggest, that it is a distinct and freestanding purpose end that is served by this process to investigate the matter in (i) in the fashion I have attempted to explain.  I cannot recall whether both those options were in 541 of the Companies Code but it does not affect, in my submission, that argument.

Now, the last point I wanted to make is this, and it picks up some general observations we make in paragraph 12e of our outline.  The cases are clear that the examination procedure should not be used to obtain a forensic advantage not otherwise available to ordinary litigants.  The consequence of our friends’ approach is that that is precisely what you get, at least if you can get yourself within 596A – that is because, from the mere accident that someone was an officer in the last two years, they say anyone who happens to get through the ASIC gateway – and I have attempted to explain to your Honours why the ASIC gateway is not demanding at all – anyone who gets through that gateway can use a system of discovery.

They say that that enables the applicant to bring a proceeding of any kind, so long as it is connected with the examinable affairs, to bring a proceeding of any kind that is not limited by considerations of the public interest or the accountability of directors, which the appellant says justifies their action.  It is very important to notice that, whether or not it is true that the public interest, or the accountability of directors, might justify the appellants’ action, there are two problems with focusing on that at all.

The first is they are inherently vague notions incapable of meaningful application in many cases.  But secondly, and more significantly for the reasons I have attempted to point out, if the appellants win it can only be because they get up on appeal ground 3, expressed at the level of generality with which it is expressed, they cannot win – and I do not suggest that they could win – by reference to some narrower principle of the public interest or the accountability of directors.

The other point I wish to make before concluding is this.  If our friends’ proposition in appeal ground 3 is right, one has the rather curious result that the first purpose in Hamilton v Oades becomes entirely subsumed.  It becomes subsumed because, as Palmer v Ayres points out, you need a potential proceeding, you need a right or liability to be established, so the first purpose is going to be connected with the proceeding or a right or a liability.  But if that is the case, why does it matter?  Because our friends say they can bring any proceeding, provided it is connected with the examinable affairs.  In our submission, that shows that the breadth of the proposition for which they contend, which is the only proposition for which they contend, cannot be correct.

GAGELER J:   Mr Izzo, it might really just show that what you identify as two purposes may be one arch purpose.

MR IZZO: Well, if that is the case, your Honour ‑ and can I – because your Honour, I am reminded, did ask me about the overlap, and I should address that, it is of course possible that there will be areas of overlap, and indeed, the example that has been canvassed with Justice Edelman, of section 1317J, where what I described as a regulatory action might actually result in compensation to either the company or to persons, be they creditors or contributories, demonstrates that in some cases it might be said that ASIC is acting for the purpose of aiding the conduct of the external administration in the sense of assisting those who have claims against the company, or identifying the liabilities of the company.

So there may be areas where one can identify the overlap, but the difficulty in saying they are all one seems to us to be that, for the reasons I have endeavoured to point out in answering Justice Steward’s question about 596B(1)(b)(i), the separate itemisation of misconduct really gives rise to quite separate, quite distinct considerations, which may have little to do with the conduct of the external administration itself.  And so it is possible that there is a sphere of regulatory action which is distinct from what I have described as the first purpose.

But if what your Honour Justice Gageler has suggested is correct and that there really is one purpose, then it must be that which…..have been identifying for 100 years, which is to aid, in the older cases, the winding up and in the modern cases, the conduct of the external administration.  If that is the case, it becomes even more difficult for the reasons we have put in our outline at paragraphs 5, 6 and 7. 

It becomes very difficult to accommodate a claim of the kind which the appellants wish to bring – this is really proposition 6 in our outline.  The external administration is about identifying and adjusting the rights and liabilities of the company, its creditors and contributories inter se.  It is not about adjusting the rights and liabilities of contributories, some of whom are not even contributories, against third parties, be they an auditor or a director.

EDELMAN J:   One of the examples that is quite forcefully given in Re Excel is the situation of a defamation proceeding which might be brought.  Do you say that on the broad view of ground 3 a defamation proceeding could fall within a connection with the examinable affairs of the company and how would that be so?

MR IZZO:   The answer is yes.  How would it be so, your Honour, depends very much on the particular type of proceeding and how one can relate it to the incredibly broad words in section 53.  All I can say without any facts about the particular proceeding is that the possibility is far from remote, but one might find a hook that enables you to draw that link.  Unless there is anything further, your Honours, those are our submissions.

KIEFEL CJ:   Yes, thank you, Mr Izzo.  Yes, Mr Kirk.  You have not unmuted yourself, Mr Kirk.

MR KIRK:   I have.  Can I just ‑ I think I am unmuted.

KIEFEL CJ:   We can hear you now, but we could not when you started.

MR KIRK:   I apologise.  I will start again, sorry.  I want to start, essentially, where members of the Court and my learned friend were just leaving off.  At the risk of being unduly boring, could I take your Honours back to appeal ground 3 at page 146 of the core appeal book, and I know your Honours have read it a number of times.  What I wanted to do was seek to deconstruct it a little and let me explain why I am seeking to do that at the beginning of my submissions, because I am seeking to show the enormous breadth of this proposition, upon which the appellants’ case rises and falls, as my learned friend Mr Izzo has just put.

There are two notions wrapped up within appeal ground 3.  So one is obviously an examination, because that is what the whole point of seeking to have an examination, but two is connected to the purpose of enabling evidence and information to be obtained to support the bringing of proceedings.  So can I take those in reverse order, first the proceedings, then the notion of examination.  The importance of there being some potential proceedings is not disputed by the appellants, and, of course, as your Honours well appreciate, goes back to the Court’s decision in Palmer v Ayres, which founded the constitutional validity of examination of powers on some length to potential proceedings.  Can I just seek to illustrate how broad those proceedings might be within the notion put by the appellants?

So, first it could be a proceeding brought by anyone.  They refer to examinable officers and other persons, but there is no limit on who may be an eligible applicant, there is no limit to the sort of person, thus, who may be envisaging proceedings.  It is the very point my learned friends made.  Secondly, it can be against anyone.  It is not just about directors or officers, or even auditors, my learned friend refers to the words – or the appeal ground, I should say, refers to “other persons”.

Thirdly, it can be about anything.  It is not limited to breach of the director’s duties, or anything like that.  And my learned friend, Mr Hutley, sought to make that very clear yesterday, around, without going to it, transcript line 972, he contrasted 596A with 598, and said for 596A, quote:

there is no constraint on the type of proceedings for which the transcripts may be used.

Unquote, that is the transcripts of the examination.  So nothing in the appellants’ formulation in ground 3 links the putative proceedings to anything distinctive to the circumstances, for example, of entering external administration, or even anything distinctive to the management of the company.  So it might ‑ obviously, it concerns…..be proceedings against the auditor, but it could be much broader, and to pick up the sort of example which your Honour Justice Edelman was raising, and which I am going to pick up in a moment.

It could be a proceeding against someone not even connected with the company.  It could be, for example, where the evidence of an officer of the company could assist the putative claimants prove a case against someone else.  So that might be a case for defamation against someone else, or a breach of confidence case against someone else where the alleged defamatory material or confidential material was sent innocently as regards the recipient to a recipient within the company.  Or, it could be that there is a causal chain which needs to be established where as part of the causal chain for a misleading conduct claim, for example, one has to show that the company would have done X rather than Y if it had known the true situation. 

So, as Mr Hutley made clear yesterday, as regards the proceedings it is entirely open ended.  Let me come to the notion of the examination power and what that might encompass.  Now, my learned friend yesterday appeared to suggest that the conduct to be examined must have been in the two-year period prior to external administration.  If that was meant, it is plainly incorrect.  I suspect it was not meant.  If your Honours look at section 596A, the two‑year requirement is simply setting the boundaries of when the person must have served as an officer or provisional liquidator. 

So, they have to have been an officer or provisional liquidator, within, to put it simply, the last two years or so.  But once that box is ticked then pursuant to 597(5B):

The Court may put, or allow to be put, to a person being examined such questions about the corporation or any of its examinable affairs as the Court thinks appropriate.

Now, I will not go back to the definition of examinable affairs, but as your Honours very well appreciate, a very broad definition in section 9, broadened yet again by section 53, the definition in section 9 encompasses not just the business affairs of the corporation, but potentially of related entities and persons. 

In practical terms, the notion of examinable affairs captures everything in the life of a corporation from its formation to its end of days and everything in between.  There is no aspect of anything done by or in relation to or as part of the affairs of a corporation which does not fall within the notion of “examinable affairs”.  Thus, the defamation example, and so forth.

The appellants’ argument at heart is that if the examiner satisfies in a tick‑a‑box fashion the two or three conditions – two conditions in 596A where a relevant person and the applicant is an eligible applicant and, as your Honour Justice Steward pointed out, there is then a third condition, the formal one in 596D – if those boxes are ticked, then that is the end of it.  That is the heart of the appellants’ case.  There are no purposive limits.

There are problems with that and let us start with the inconsistency of the appellants’ case.  The appellants accept there is an implied limit on the power because my friends accept that, even though the terms of 596A could extend to companies not in external administration, the point made by Justice French, without going to it, at paragraph 86 of Highstoke  ‑ that was the very issue in Highstoke – my friends accept, no dispute, as was reflected in this Court’s judgment in Palmer v Ayres, that it does not mean that.  It is limited to companies in external administration.

Mr Hutley does not call that a gloss on the statute but it is an implied limitation based on ordinary principles of contextual construction.  Moreover, my learned friend contradicts himself because he accepts there are purposive limitations even beyond that on the 596A power.
First he said – transcript 214 yesterday – that quote:

The process cannot be evoked for a purpose which is foreign to it.

So that assumes there are some purposive limitations.  Secondly, my friend accepted the oft-cited example that you cannot use an examination for what is referred to as a “dress rehearsal” of cross-examination.  Thirdly, he accepted in response to some questions from your Honour the Chief Justice that you cannot use it as a fishing expedition.

So, the appellants’ argument that it is all very simple, you just read the text, you just tick two or three boxes and that is it is actually inconsistent with their argument.  They do accept limits.  The question then becomes what are those limits?

Can I grapple at this point with the question your Honour Justice Gageler has asked – and your Honour Justice Edelman another way a couple of times about what sort of limitations we are talking about?  The doctrine at play here ultimately is abuse of process – and I will develop that briefly in relation to the notice of contention.  That focus is on the purposes as I will seek to develop of the mover of the process.

As the cases say – Williams v Spautz and the Lunt Case, the question is, is the mover seeking some purpose not granted by the law?  That then takes you to an analysis of what purposes does the law grant? That then takes you back to the statute and to an understanding of the statutory context.

I would add at this point – and without in any way seeking to contradict what my learned friend Mr Izzo has said – there has been a lot of focus on positive statements of purpose – and I do not seek to undermine that – but it has also been noted in a few contexts that sometimes it is easier to say that a purpose is not within power as opposed to seek to capture all the purposes that might be, and the focus of my submissions will more be on what is not within power, and in particular that the breadth of appeal ground 3 is not within power.

To deal briefly with your Honour Justice Edelman’s question about Lord Sumption’s judgment, Lord Sumption, with great respect, seems to have it a little bit each way.  In paragraph 15, he seems to suggest it is not just a matter of construction of the statute, paragraph 30 seems more focused on - for the rules, I should say, more focused on the rules.  For our part, we are content to come back to the statute.

EDELMAN J:   There may be another distinction which is, even assuming that it all ultimately derives from the statute, there may be some limitations which are concerned with the extent of authority – so that the authority or the power must be confined to the statutory purposes.  But there may also be a limitation – and I think this is the point that is being made in the context of directors’ duties…..that derives not from whether or not the action was outside power – or outside authority – but whether it was within authority, but an abuse of that authority.  All of the constraints that Mr Hutley was referring to might be seen as constraints that are concerned with an abuse of what would otherwise be within authority.

MR KIRK:   I am not disagreeing with your Honour.  The question then becomes of course what are the sources of the constraints, how do you seek to delineate them?  In the end, you probably do have to come back to the statute, perhaps, aided by some broader understanding of the nature of the examination process and so forth.  That actually leads, in a sense, to my next point – and I do not want to overstate this point – but that is about the extent to which an examination process intrudes on personal rights and freedoms.

Now, I know that this has been addressed in a number of cases – I am not wanting to over-egg it.  Just to briefly remind your Honours, an examinee is required to answer questions under oath and affirmation – this is all in 597 – they have to do so in general in public, the privilege against self‑incrimination is overwritten, they may be required to produce books in their possession.

As Mr Hutley said, the evidence can then be used against them in any subsequent proceeding, by anybody, save that if they claimed privilege, it cannot be used against them in civil or criminal proceedings.  But as Chief Justice Mason noted in Hamilton v Oades, pages 493 to 494, that does not limit derivative use immunity so they can still do significant harm.

The point I am seeking to make is just this.  These sorts of compulsive examinations are a significant intrusion on rights, and they are a form of investigative process and a pretrial deposition‑type process of a kind which is not otherwise generally available in Australia.  If one needs authority for that obvious position, we have referred to a Full Court case at paragraph 3b of our outline, Jones v Treasury Wines.

STEWARD J:   Mr Kirk, why is not the answer to your concern to be found in the court’s powers in 596F and 597 to control examination and to impose conditions upon it as distinct from the issue which here is mandatory?

MR KIRK:   That question overlaps, in a sense, with the sort of issues that play in Hamilton v Oades as well actually.  I would come back to my response a moment ago to Justice Edelman - and I am not seeking to disavow those limitations, but the question then again would be, well, what are the sources of the discretionary restraints?  As to overriding privilege, if I jumped up at an examination of an auditor and said, hang on, you are asking the person to incriminate themselves, my opponent would jump up and say look at Hamilton v Oades, and that says you can override privilege.  So, my point is a broader one.  It is an inherently intrusive process. 

Now, that does not mean you do not give effect to the statute, but as one factor in the construction process.  Taking account of the enormous breadth of the potential examinable affairs as one factor, you take into account, well, it is a significant intrusion and a departure from the ordinary principles of law – a departure from the general system of law, to echo the famous statement in Potter v Minahan.

That point, incidentally, is made in a case, if I can take your Honours to the core appeal book, because it is picked up at page 104 of the core appeal book, paragraph 63 of the Court of Appeal’s judgment.  There is a quote from a Full Court decision called Grosvenor Hill, where the Full Court recognised that there are competing public interests here, and the point I am seeking to make currently is that, in construing the statute, one should not forget that second public interest, about the intrusion into freedoms. 

That is part of the context, incidentally, where my learned friends for the first respondent cited in their written submissions the Re Imperial case from 1886 which established that in general it is not appropriate to use an examination process to pursue personal or private advantages.  Now, I accept that is a century and a bit ago, but it reflects this core notion of there are balances here. 

By way of seeking to not take too much time, can I take your Honours to our submissions, which quote some relevant cases.  At paragraph 18 on page 7 we have an extract from the Full Court in Re Excel, and it is that first paragraph we have extracted which gives that defamation example that your Honour Justice Edelman raised, and about the illegitimacy of pursuing ordinary litigious rights by way of an examination process in a way which is unconnected, in substance, to the external administration of the company. 

Immediately under that we have quoted from Justice Lander’s decision in Evans, and if your Honours could look at paragraph [249], the last quoted one, his Honour gives another example about:

a person claiming damages for a tort against a corporation –

So, in our submissions we talk about a slip and fall case.  Given the breadth of examinable affairs it could be an employment dispute, it could be a contractual matter, it could be any other type of legal claim which could then be the subject of the examination.

As the Court of Appeal judgment goes, there are various slightly different views taken in the intermediate Court of Appeal decisions in Australia, but one common theme actually is recognition that these sorts of things are too far.  Without going to it, at the Court of Appeal decision at paragraph 80 they quote the Victorian Full Supreme Court in Flanders v Beatty, giving the defamation example, and at 82 they quote the West Australian Full Supreme Court in Boys v Quigley, again giving the defamation example.

So, there is general agreement that merely because the company is in external administration does not mean that the examination proceedings should be available to benefit a potential claimant against the company, its officers or third parties.  My learned friend Mr Hutley yesterday sought to respond to this argument and at around line 545 he embraced the point.  He said:

For example, there may be major questions of public interest in relation to vast harm, perhaps to children or the like in a company whose structures have failed to the extent that there is a prevalence of damage.

My friend might be right, but that is not an answer.  What if there is not a major issue of public interest?  That is the point we are seeking to make.  What if it is the mere desire to pursue a common…..ordinary, litigious claim?  What all these cases have accepted is that is not sufficient to enliven the power and, obviously where I am leading, that is what the appellants are seeking to do here.

My friend says – and he says it a number of times because it is a great rhetorical point – this case is about a really big number.  It was a capital raising of $750 million.  But as members of this Court have said often in special leave applications, just because you have a big number does not make it a matter of public interest. 

Fundamentally, the appellants’ claim here and the one they want to pursue in their class action is about misleading conduct and lack of disclosure with respect to the capital raising and also the accounts for FY2014 and FY2015 – without going to it, see their submissions paragraph 15.

That is a shareholder claim, about paying for shares at an inflated value.  As this Court knows, that is the…..of every class action at the moment.  This Court dealt with such a claim in Wigmans v AMP earlier this year.  It does not depend on the company being insolvent.  It is just saying that with overpriced assets sold because of misleading conduct or lack of disclosure, it is no different in principle from an individual saying with respect to an insolvent car dealer, “You sold me a lemon and I overpaid because of your misleading conduct”.

The Court of Appeal here was right to characterise this case as about the pursuit of private interests.  It does not bring any benefit to the company both because the capital raised…..to the company because it does not reduce the liabilities of the company, and because the proposed class is not even limited to people who were still contributories when the company went in to administration – some of them had sold out. 

My learned friend yesterday also referred to the purpose motive distinction, as addressed without going to it by this Court in Lunt, and before that in Williams v Spautz.  That distinction hinges on the immediate purpose versus ultimate purpose.  It is a question of degree and characterisation.  My learned friend Mr Hutley argued around line 1358 yesterday that their ultimate purpose is damages and he says well that is just motive.  He says that does not mean there is an immediate improper purpose. 

My learned friend then did not spell out what is the appellants’ immediate purpose beyond saying our purpose is to employ the process of examination.  But it is circular to say that the purpose of employing the process is to employ the process. The only purpose here of the appellants is to pursue their private self-interested, ordinary – and I am not saying that critically – but its ordinary litigation, and they are seeking here an advantage by way of pretrial deposition process not available to them if they take their chances in the Victorian Supreme Court. 

Now, one of the points we have sought to make in our written submissions is that it is significant – so let me seek to structure it this way.  Your Honour Justice Steward has asked a couple of times, well, 596A was a change from 596B, and that is explained in the explanatory memorandum, and it changed in two ways.  It took away the discretion and it took away the limit about misconduct and so forth.  It was broader.  So, your Honours asked, with respect, the perfectly reasonable question, why should we start reading that down, to which my response is consequences, context and purpose.  I have sought to expand on the consequences.  I have sought to show how enormously broad and fundamentally intrusive it would be, but context is also important here too.

EDELMAN J:   Mr Kirk, just before you move away from the enormously broad and intrusive consequences, are there actually any examples of any circumstances where ASIC has ever authorised - in the authorities - a person to examine where the person’s purpose was, for example, defamation proceedings, a slip and fall claim, an employment pursuit and so on? 

I appreciate Mr Izzo says the person does not need to provide their purpose to ASIC, but assuming that the person gave no purpose whatsoever to ASIC for the examination it is – are there any cases where those type of issues have been raised, or are these just very extreme consequences that you say would arise if we gave the broad construction to this provision?

MR KIRK:   The general answer to your Honour’s question is I do not know, but that cuts a bit each way.  I cannot point to any cases, that is true, but that may well be because no one has thought that might be within power, perhaps because they thought Re Imperial and the line of authority since and the references to that sort of principle in Re Excel is still good law.  So, the absence of evidence is not evidence of absence, in a sense.

I make this broader point.  My learned friend, Mr Hutley, yesterday was making a point about how broad ASIC’s powers are and about how broad all these powers are.  He is embracing the breadth.  He is the one who says that “examinable affairs” is as broad as your arm and that proceedings can be about anything.

I know there is a danger of counsel using extreme examples, but I am actually responding to the very sort of case Mr Hutley is giving and the very sort of case he is defending because all the appellants are doing is seeking to pursue an ordinary or common type of class action in the 21st century, being a shareholder claim.

Your Honours, I note the time.  Sorry to be a bit longwinded.  I will be another 10 minutes or so.  I am happy to continue now or proceed after lunch, as suits your Honour.

KIEFEL CJ:   Given that there will be a reply, I imagine, we will adjourn now, thank you Mr Kirk. 

MR KIRK:   May it please the Court.

KIEFEL CJ:   The Court will adjourn until 2.15 pm.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ:   Yes, Mr Kirk.

MR KIRK:   Thank you.  I was just getting to some contextual factors.  I have already made the point that there is no dispute that examinations are limited to the context of companies under external administration.  Can I just fill that out a little and again, in the interests of efficiency, can I ask your Honours to go to our written submissions at page 9, top of the page, paragraph 24.  We quote from his Honour Justice French in Highstoke, and I just wanted to draw to attention the first paragraph we have quoted where his Honour refers to the context and how that is strongly suggestive that:

the examination power is intended to be ancillary to the functions of the Court –

and so on, to the end of that paragraph.  Similarly, if your Honours look down to the next - paragraph 25 of our submissions, we quote something that Chief Justice Gleeson said in the Hong Kong Bank Case, which I think Mr Hutley referred to yesterday, which is to similar effect about the statutory context of external administrations throwing some light on the purposes of the examination procedure, and although his Honour was referring to 597, there is no reason to think it would be any different for 596A.  Finally, in this trilogy, if your Honours look to paragraph 28 of our submissions, the last three lines or so, we quote your Honour Justice Gageler in Palmer v Ayres, again about the purpose of Part 5.9.

Just to make one other point, without going to it, in Highstoke at paragraph 88, his Honour Justice French noted that it is no coincidence that there are similar powers available to trustees in bankruptcy, and that fact plus the references to external administration points to one particularly important factor as to the – at least, to a core purpose of the examination powers. 

External administrators or trustees in bankruptcy, or receivers are taking on a role, acting for the company and/or creditors generally, or some specific secure creditor, where they suffer from the deficits of information and experience because they are not the ones who have been running the company.

Without going to it, that point was made by the Full Federal Court in Grosvenor Hill, as quoted by the Court of Appeal here at paragraph 63 on page 104.  What that indicates – and again, without seeking to be exhaustive, necessarily, of the purposes of these powers, but a core purpose is that it is - there is a public dimension, a public interest dimension to these powers beyond the pursuits of the interests as an ordinary litigant, tied to the fact of external administration, where it is a core purpose to enable the relevant person to gather information as to assets or claims that are held by the company for the benefit of the administrators or for analogous persons such as trustees or receivers in the interests of the relevant classes of right holders.  In other words, it is to enable the doing of things to be done for the purposes of the external administration that cannot be done in ordinary litigious processes.

To just give one little illustration of that point, if I could ask your Honours to go the core appeal book at page 105.  This in the Court of Appeal judgment, paragraph 68.  There is a long quote from his Honour Justice McLelland in the first instance judgment of Re BPTC which was then the subject of the appeal in the Honk Kong Bank Case.  Can I just draw to attention a couple of bits.  Your Honours will recall that this was about a trustee, the new trustee seeking to exercise the examination power in relation to the estate mortgage failure.  The previous trustee was Burns Philp.  In the long quote if your Honours look at the end of the fourth line, Justice McLelland said:

In particular it was put that the new trustees have, or should have, no more significant status or function than that of private litigants . . . I reject this contention.  There are significant similarities between the position of the new trustees in the present case and the position of a liquidator. 

Then the next sentence.  Then if your Honours jump to about point 6, towards the end of the line, it says:

It has not been shown that the effective instigation of those matters by the new trustees for the ultimate benefit of the Estate Mortgage unitholders is any less a matter of ‘public’ concern and interest than would be the effective investigation by a liquidator –

and so on to the end of the sentence.  It is notable, in our respectful submission, that Justice McLelland did not say we do not need to worry about any of that, the boxes are ticked, it is within the text.  Rather, his Honour was saying this is a matter of public interest and concern, and thus it is a valid exercise of the power. 

The core point we ultimately seek to make, in a sense, is this.  Compulsory examination, including by 596A, is an extraordinary tool.  It is meant to aid those acting on behalf of the company creditors or contributories in the interest of those groups taking account of the…..companies in external administration, also, no doubt, to pursue regulatory purposes, and I am not seeking necessarily to be exhaustive in stating those core purposes.  Rather I use them to then contrast what is not a legitimate purpose, in our respectful submission. 

Examinations are not meant to be a tool available simply to benefit those like the appellants who seek to aid ordinary litigation claims in their private interests, relying on the happenstance that the company is in external administration where in substance what they are doing is obtaining a tool - this pretrial deposition tool not available in ordinary litigious processes, without any public interest dimension other than to pursue their own interests. 

That is what is wrong, incidentally, with the dress rehearsal point that gets repeated in all these cases.  Even liquidators cannot do dress rehearsals for cross‑examination, and why not?  Because it is seeking an advantage for ordinary litigation which, to the extent it is legitimate, should be pursued in ordinary litigation rather than relying on the extraordinary tool.

It is similarly what is wrong – sorry, one of the things that is wrong with seeking to require disclosure of defences or establishing guilt, being two matters referred to by Chief Justice Mason in Hamilton, at page 498 of the report, as not being legitimate.

That point we seek to make – actually reinforced by two provisions my learned friend, Mr Hutley, relied on – namely 596E and 597(5A) – so that is on page 152 of volume A of the materials.  So, 596E, your Honours will recall, is that:

If the Court summons a person for examination –

and that is under (a) or (b) –

the person who applied for the summons must give written notice of the examination to:

(a)as many of the corporation’s creditors as reasonably practicable; and –

to put it simply, each other eligible applicant with a couple of exceptions.  Then, under 597(5A), ASIC or any other eligible applicant can take part. 

What that illustrates, in our respectful submission, is that it shows that examinations are presupposed to have a broader interest.  Simply pursuing whether it is a defamation claim or a slip and fall or a shareholder class action is not the sort of thing which is likely to be of interest to others, whereas pursuing information to disclose existence of assets, causes of action, calling in the assets, being able to pay up…..external administration, do have that broader public dimension.

Can I turn then briefly primarily to the notice of contention?  The context of this is in the Court of Appeal’s decision right at the end, at paragraph 140 on page 131 of the core appeal book, where their Honours said, about halfway through the paragraph, that:

they can all be reconciled –

this is the intermediate Court of Appeal’s decisions:

on the basis that even if the examination was brought by an eligible applicant for it own purpose, that will not be foreign to the purpose . . . if it can be shown that fulfilment of the purpose could confer a demonstrable benefit on the company or its creditors -

Now, we respectfully disagree with that somewhat tentative suggestion.  The core doctrine applied here, as we all know, is abuse of process.  That does look to the subjective purpose of the person employing the court process.  That it does is illustrated, for example, by Williams v Spautz – the ulterior purpose that there is one proceeding and so the person brings another proceeding to try and get an ulterior benefit for the first proceeding.

It is subjective.  We know that in paragraph 15 of the JKX Case, Lord Sumption accepted that point.  Your Honour Justice Steward asked about, is it subjective/objective.  We say subjective but for the reasons I have given we would also add – my learned friend, Mr Izzo, usefully drew your Honours’ attention to the South Sydney Case.  Without going to it, could I commend to your Honours paragraph 44 in Justice McHugh’s judgment where his Honour makes the point that often there is little difference in practical terms between employing a subjective or an objective test.

GAGELER J:   Mr Kirk, is this really a notice of contention point?  As you point out in your summary of argument, it is not put against you that there is an incidental benefit here.

MR KIRK:   No.

GAGELER J:   Why are we going to it?

MR KIRK:   Your Honour is quite right.  That point is made at reply paragraph 18.  The reason we raise it, for what it is worth, is to throw light on the broader issues.  That is really why I am raising it – to throw light on the broader issues as your Honours grapple with how abuse of process interacts with these statutory provisions.

Can I make a couple of final points about it.  I will be very brief.  We apprehend from the outline of submissions of the appellants that they will seek to say that this actually illustrates that you should have no purposive restrictions on 596A because otherwise it would be too restrictive.  They give the example of a creditor pursuing self‑interest but also potentially benefiting other creditors.

Much will depend on the facts.  It will always depend on the facts, but characterisation of purpose is a matter of characterisation and it may well be that in some cases the creditor is really saying, yes, this will benefit me but as a member of a class and thus will have a broader benefit.  It is not just my ordinary…..

To put that in a slightly broader context and to conclude, for ordinary litigious claims, if the claimant knows enough to sue then sue, if not within cooee of knowing enough to sue, then do not sue and be wary of using the examination process as a fishing expedition.  If you are in the grey area that you are not sure, the law provides for that with preliminary discovery, which is available through courts all around the land. 

Our core point ultimately is this.  The examination compulsive procedure is not meant to address this problem.  It is meant to address other problems and the mere happenstance that the company is in external administration should not be used as an excuse for someone like the appellants to come in and say, “We ticked the boxes; let us use the procedure”.  They are the submissions for the second respondent.

KIEFEL CJ:   Thank you, Mr Kirk.  Reply, Mr Hutley?  Mr Hutley, we cannot hear you.

MR HUTLEY:   After all these months – I do apologise.  My learned friend the first respondent accepts that benefit need not be conferred upon the company or its creditors in all cases.  If this case is viewed through the prism of power, in construing a condition of its exercise, the first respondent agrees with the appellants that the requirement of benefit to the company or its creditors – it seems no one has sought to support all its creditors or, for that matter, all contributories any longer, so one wonders why, if it is of benefit to any contributories, why one cannot…..setting that aside is not a condition of the exercise in all cases.

What the first respondent does is seek to impose the condition of benefit on the exercise of the power in certain circumstances, that is, when the applicant ceased to bring about a result which is to serve what has been characterised as the first purpose - that is in paragraph 5 of our outline - then there must be a benefit. 

Two points arise.  Firstly, it is not immediately clear from a plain reading of 596A and, for that matter, any relevant context, that Parliament intends to impose any such condition which applies for one purpose and not for another purpose.  Secondly, it is not immediately clear how the legislature could be seeking to impose such a condition on the exercise of a power for one purpose but not for another purpose where the court exercising that power has no discretion and is not even required to be apprised of the applicant’s purposes, where the applicant is not required to provide any affidavit in support setting out why it is bringing the application.

That is, the first respondent submits that the legislature has imposed some form of condition, whether it be called a purpose or a condition, really, in one sense, relevantly, can be set aside for a moment, on the exercise of the power and the legislative context, where it has deprived the court of the capacity, deliberately, consciously, to be compulsorily informed of the purpose of the applicant, the person seeking the order, the eligible person.

The first respondent at point 10 of their submissions, the second purpose is to bring regulatory action.  My learned friend, Mr Izzo, submits that the second purpose involves the bringing of proceedings which are – it is not quite clear whether it is civil penalty or criminal limited, or it is just anything which can be characterised as “regulatory” proceedings.  The question they pose is whether the appellants’ purpose is to do so.  We accept it is not our purpose that we bring regulatory proceedings. 

That is not to say that when one looks at the context of what we are investigating, which clearly involves breaches of the Corporations Law, our purpose might not be apt to achieve that result, that is, of disclosing breaches of regulatory provisions, and that is inherent in our learned friend Mr Izzo’s reference to the fact that some of the provisions to which we will necessarily inquire, as it were, cross over regulatory proceedings which could be brought by ASIC. 

Now, Mr Izzo accepts that a purpose which serves the first purpose, with the potential to result in that benefit to the company is a proper purpose.  Then we say by parity of reasoning, a purpose which serves ASIC’s purpose, including the potential to assist should material be disclosed of bringing regulatory proceedings, should also be proper, namely, in other words, if one is looking ‑ ‑ ‑

EDELMAN J:   Mr Hutley, is not that then conflating purpose and effect ‑ ‑ ‑

MR HUTLEY:   I accept that, your Honour, but my learned friend in his submissions has accepted that if an effect of the proceedings is to advance the winding up, the regulatory proceedings, that is sufficient.  That is exactly the point of the notice of contention as we understand Mr Kirk, because the Court of Appeal has said even if I have a wholly selfish purpose, but I also achieve one of the ends, then that is a proper application.

We say by parity of reasoning, if one is going to do that, why, if an application involves the investigation of matters which could be investigated by ASIC and, therefore, could disclose matters of regulatory significance, we ask rhetorically how could one say that that is an improper application?  So, in other words, they impose a purposive requirement at what I might call paragraph 6 of our outline, as reframed by them, and submit there is not such a purposive requirement at paragraph 5. 

So, in other words, this goes to the fundamental submission we make about what our learned friends are seeking to do to 596A.  We say 596A, and no one has been able to find in the words of 596A any constraint of the variety which the first respondent seeks to impose, that the purpose must be regulatory proceedings. 

In fact, the only source of this imposition lies in 596B, and its relationship to the observations of Sir Anthony Mason in Hamilton v Oades, and then, in a sense, says, despite the fact there has been a deliberate decision to withdraw the critical subparagraph – reference to the critical subparagraph which my learned friend refers to as the “misconduct paragraph”, he says one should assume the legislature has similarly imposed such a limitation on 596A.  Even assuming, and we have made submissions in‑chief that you should not assume, there is such a limitation on 596B, that is despite the fact – sorry, your Honour.

KIEFEL CJ:   Mr Hutley, could I just ask you to clarify - do you accept that the purpose to which the examination is going to be put is a consideration, or are you saying that 596A is devoid of any issue of purpose in an abuse of process case?

MR HUTLEY:   What we have submitted, as we submitted in‑chief, is once the conditions are met, if the end one is seeking to achieve - the take up is to investigate the examinable affairs with a view to bringing proceedings, then that is a proper purpose if you are an eligible applicant.  The important point is, as conflated by our learned friends, is investigate.

The critical aspect of 596A is not to bring litigation.  It is not to give a forensic advantage.  It is to authorise investigation with a view to, if the investigation disclosed materials which justify litigation, bring it.  That is why the courts have always held ‑ ‑ ‑ 

KIEFEL CJ:   But that is to say, in other words, it authorises an examination to see if there is a basis for proceedings.

MR HUTLEY:   Yes.  We submit – and that is exactly the basis, the only basis upon which a liquidator can bring it, because if they know they can bring proceedings and they are merely seeking what is classically called “forensic advantages”, they cannot do that.

KIEFEL CJ:   And they are proceedings of any kind?

MR HUTLEY:   They are proceedings which are proceedings which come out of, in the sense of can be informed by, the examinable affairs of the company because you ‑ ‑ ‑ 

KIEFEL CJ:   Which is so broad it must mean any proceedings.  Is that right?

MR HUTLEY:   When your Honour says, “any proceedings”, the classic example given of defamation is, with respect, referred to – and the example needs to be interrogated.  Often a liquidator might well wish to examine officers if, for example, they were – the company in liquidation was exposed to a defamation case – take, for example, a media company.  What the case has made clear is you cannot examine a person, an officer, for the purposes of bringing a defamation proceeding against him or her, as it were, resulting from their personal behaviour. 

KIEFEL CJ:   Why is that?  What is the distinction between a defamation proceeding and say a matter affecting the corporation – in say the contract, a relationship of employment, or a work, health, and safety matter? 

MR HUTLEY:   I accept that, your Honour.  If the defamation case, which – give an example of a liquidator, of a media company.  The liquidator, he or she could undertake an examination of officers going to defamation cases against that media company and he or she could also ask questions about the behaviour of individual officers.  But he or she could not ask questions solely going to establish a personal action against an officer for defamation. 

That would be same with a liquidator, and those are the examples that the courts are dealing with because it would not, with respect, be concerned with the examinable affairs.  Sometimes a defamation claim will be at the heart of the examinable affairs and, if that is the case, there would be nothing wrong with a liquidator examining it. 

What the cases are really referring to is you cannot examine matters which are not properly to be characterised as part of the examinable affairs of the company.  If they are, you can ask them, because the examinable affairs of the company can impact upon the company.  So, in other words, what we do accept is what you cannot do, and no one can do, is use these cases as trial runs for a case that you are perfectly able to run, that is, the cross‑examination case.  The liquidator cannot do it.  ASIC cannot do it.  Any person appointed by ASIC cannot do it.  They cannot do it to harass officers.  Liquidator cannot do it; my clients could not do it; ASIC could not do it.  It would be misfeasance in public office.

EDELMAN J:   So, on your case, Mr Hutley, it would then extend to a person wishing to investigate, let us say, a very significant slip and fall case claim that could be brought against the company?

MR HUTLEY:   ASIC could investigate that.  If ASIC appoints somebody to do it, they can.  It may be a matter of – let it be assumed some child is tragically rendered a cripple and it became a matter of intense public interest about the operation of a company which exposed children to such risks.  It would be, as they say, a slip and fall case.  But ASIC might perfectly appropriately decide, “I will investigate it”, or authorise a parent to investigate how such an organisation took place.  We do not resile from that at all, your Honour. 

In effect, the whole case comes down to whether the gloss will be put on this power which my learned friend, Mr Izzo, says is the gloss of regulatory proceedings because otherwise, as he accepted, he is perfectly happy with our formulation of paragraph 6, with adding the word “regulatory”.  In our respectful submission, the moment that is done, one simply cannot get away from the fact, as my learned friend, Mr Kirk, observed, is the movement from 597 by the 511 cognate under the old  Code to 596 was intended to broaden the power, but it was intended to broaden the power very significantly, in our respectful submission, on any view.

KIEFEL CJ:   There is very little in the extrinsic materials to suggest that, Mr Hutley.  It is such an enormous broadening of power.

MR HUTLEY:   With respect, we do not accept – we have made our submissions that it was never limited in the way that the Court of Appeal said even under the 596B requirement, and I am not going to go over that.  For the reasons we have submitted, it was not so limited because none of the cases have ever properly interrogated or dealt with the significance of the addition of ASIC and ASIC’s capacity to authorise.

The scope of that, as Justice Gleeson said in Hong Kong, has not been investigated and he did not investigate it, and no court, in our respectful submission, until this Court, has ever investigated because every case has been focused on what is the first ground.

So this Court, in effect, is dealing with it for the first time and, in our respectful submission, all the bases for conferring that power to interrogate officers lies equally in favour of any person who ASIC chooses, as long as they have done so lawfully.  They are people who by hypothesis will not be able to, in effect, conduct normal procedures in dealing with a company – for example, they are a contributory because the company has ceased to operate.

In other words, most of the procedures by reference to which one can obtain material for litigation go because the company dissolves.  It goes…..  That is the fundamental criteria and that is the criteria…..is why a broad power has been conferred to allow people to interrogate and no answer has been given to the question which I think was asked by your Honour Justice Steward, why all this cannot be managed through the day‑to‑day control by the Supreme Court of individual questions.  Why does this have to be, with respect, glossed because it is nothing more than a complete atextual constraint on a pretty simple power which no one has suggested could not be beneficial?

By reference to basically legislation which is in different terms, any consideration of it has not looked at the question which we have raised and, in our respectful submission, in those circumstances our learned friends are really asking your Honours to construct limits.  Now, my learned friend Mr Kirk submitted, “We accept there are limits”.  Well, the Court has held that it is limited to companies in insolvency.  That is the only atextual construction. 

The other matters are not because of construction.  It is because they arise out of the fact that they involve - the abuse of process cases are abuses of process because they are not discovery.  They are the antithesis of discovery.  Every one of them – harassment, running a cross‑examination, trying to knock out defences, et cetera – they are because it is not discovery.  It is in effect trying to get a leg up in the true forensic sense through this process.  We say that is the limitation, and that is an appropriate limitation because it is contrary to what this Court has held is the central aim of this - that is, discovery.

Our learned friends constantly move to the ultimate end of litigation and assume we have got there.  Assume, for example, my client was…..Mr Kirk said, can just start a suit.  The whole essence of it, even the liquidator, if they have all the materials to properly start a suit, they cannot use this power, nor can we, because that would be exercising abuse of process.  So the central question is discovery.

Some reliance was put to the fact of ASIC’s position  and I think my learned friend, Mr Izzo, came to the point that ASIC’s authorisation power is effectively not a power at all because it simply has no utility.  Of course, it is needed with respect to receivers, for example, and there is no basis for constraining ASIC’s power in the way indicated.

The next reference was made to the statements in the Full Court in Re Excel.  It is important to appreciate that in Re Excel itself – and can I take you there just for a moment.  If one goes to page 73 – it is in the materials behind tab 27 at page 837.  In the report at page 73, you will see at G and following, the receiver gave a detailed explanation to ASIC as to why he wished to conduct the examination and what he wished to examine.

It is just passing belief, and no case has ever been drawn to your attention where somebody has purely come up to ASIC and said, “I’m a creditor; please authorise me”.  In all the cases you have gone through and been taken through you will find no such example because, quite frankly, it is absurd.

ASIC has to know what your aim is.  It may not know who you are going to examine because you have a power to seek to examine officers.  Therefore, the comments later made by the Full Court were in the context of, “You may not know at the time of the application, ASIC may not know at the time of the application who the officer is”.

Thus, for example, there could be a question:  did that officer have anything to do with the relevant materials, matters the subject of inquiry or, for example, are you trying to harm that officer or the like?  They would be improper purpose cases in the way that…..are you not using it for the process of discovery?

But no case has been drawn to your attention where ASIC – where somebody has wandered up to ASIC and said, “I am X, I am a contributory, please authorise me to bring an application to investigate the company”, because we would submit in that situation it would be an abuse of ASIC’s power to do so, because it would be absurd, because if that was justified they could authorise every human being who was a creditor, and there would be no justification for rejecting anybody, if that solely was sufficient. 

These cases have to be understood in the context, firstly, that they were cases where there was a discretion conferred expressly on the court about examination.  So, in effect, there had to be an interrogation there of many things, a number of things, for the Court to exercise its discretion.  That is absent here. 

Secondly, it does not say, nor could it say, that ASIC only knows the relationship - are you a creditor, because that would be absurd, because it would be irrational for ASIC to understand it.  Therefore, their concentration was at the moment of you want to – I have a discretion whether you will examine Jane Smith.  Now, I want to know about something about that, and ASIC could not know whether you wanted to examine, or may not know, whether you want to examine Jane Smith, but it does not mean that ASIC is completely ignorant of what your objects were, as we had to put forward, in every case you will read.  But one thing that is clear is that ASIC is told, telling it why you are doing it.  ASIC makes its judgment on that. 

Now, our simple point is, after that judgment has been made, if the person is, in effect, carrying out discovery, and the requirement, with respect, to litigation, is because of the constitutional requirement which this Court has imposed, subject to, perhaps, some uncertainty around the liquidator, and your Honour Justice Gageler’s observation it may not necessarily be wholly litigation bound, the administration of a company in liquidation, and that is why we, as it were, think there may be two objective objects, because there will not be a complete overload, because of your Honour’s observation, which, as we read it, accorded with the plurality’s view, although perhaps not as expressly stated as your Honour’s, and that is why it is expressed in the two elements, paragraphs 5 and 6 of our outline, and there seems to be no debate except for the insertion of the word “regulatory”.

We submit that that is, with respect, a wholly impermissible approach to a broad discovery power which is expressed in the way it is.  That is really what is between us, with respect, your Honours.
In effect, the floodgates arguments are what they are.  Yes, could ASIC decide to authorise somebody to do something trivial?  It is theoretically possible.  Nobody has ever suggested they have.  Nobody has ever suggested why they would.  The legislature has conferred upon ASIC the discretion, conscious of ASIC’s role, and its role is not just limited to the section 11(4) function as, in effect, some tiny little thing, nothing to do with its position. 

ASIC obviously can have regard to its broader consideration.  That exists because it can appoint somebody an eligible applicant for a broad range of applications, not just with respect to one company, and I took your Honours to the subclause of “eligible applicant” in (e) which justifies it. 

So ASIC clearly is intended to be able to use this for a broader object than merely assisting some insolvency, if it can appoint people for that…..  So, in other words, all depends upon, in effect, making a whole series of assumptions which are completely atextual and imposing it upon this structure, and all can be controlled by the court through its oversight of individual applications.  Your Honours, I will just see if that really covers what we wanted to say.

Now, little can be made of the fact that the examination is an imposition on individuals and your Honours, particularly Justices Keane and Gageler, have in cases referred to the limitations on use of the presumptions about interfering with fundamental rights when the very structure of the legislation interferes with fundamental rights, the degree to which really becomes a question of construction rather than by reference to principles such as Coco v The Queen.  So we say little can be – and I am not suggesting my learned friend overly leant upon it, but it really takes one nowhere.

That then led to my learned friend Mr Kirk’s final position that what one has to look at is because the company is insolvent, because of the special position of liquidators and the like, that really should in some way inform the limiting approach, although he was very careful to point out that he could not express the limitations completely.  All he could say is “not my client”. 

That leads me to another point.  It was submitted that our case is, in effect, an all‑or‑nothing case.  It either, in effect, is the whole floodgates or nothing.  That was done apparently by reference to paragraph 3 of our notice of appeal.  For example, if the court construed that ASIC could appoint people to investigate matters which ASIC itself could investigate and that was the limitation, there is nothing in paragraph 3 of our notice of appeal which would be inconsistent with such a construction.

Since it was common ground that ASIC could easily have itself investigated these very matters wholly appropriately, why one asks rhetorically, when they have appointed us to do it, is that ipso facto an improper purpose because after the investigation our object, if the investigation is successful, to bring proceedings which would benefit a class of people who are, with respect, a significant class of people who invested in this company and lost three‑quarters of a billion dollars.

So when one speaks of the public, maybe it is not the entire public but in the old days to deal with such things as prospectuses you would certainly call it a section…..We do not accept that this is an all‑or‑nothing case in the way that our learned friends ‑ ‑ ‑

GAGELER J:   Mr Hutley, the price of special leave was a considerable narrowing of your case.  You are really stuck with paragraph 3, are you not?

MR HUTLEY:   I understand, but if your Honours were to construe the legislation to say that ASIC could, for example, confer a power on an applicant who is investigating matters which ASIC itself could investigate, then paragraph 3 would be no inhibition to our success because that would be as a result of your Honours’ construction of the limitation, in effect the implied limitation on the legislation.  I am saying no more than that, your Honour. 

Your Honours are not necessarily bound to accept Mr Izzo’s formulation of the second condition or mine.  That is all I am saying – no more than that, your Honour.  We are not advocating it.  Your Honours in effect have to determine the scope of this power.

GAGELER J:   All I am saying, Mr Hutley, is it does not mean you win if we come up with some other formulation.

MR HUTLEY:   Can I say your Honours could come up with a formulation which none of us have thought about, and I could win or lose.  I accept that.  All I am saying is our learned friends have submitted it is either their construction or our construction and we can only win on our construction.  I am going no further.  I am not advocating it, your Honour.  We have put our position and we submit it is right, but your Honours have to determine the true ‑ if there be limitations to this legislation, what they are and then apply those to the circumstances.  I am going no further than that, your Honour.  Now, I do not know if the notice of contention actually really is actually alive, for the reasons indicated, but my learned friend did say a few things, so I will ask ‑ ‑ ‑

KIEFEL CJ:   I think Mr Kirk suggested it was in the category of a help for matters of contention because it points to particular aspects of the argument that we might otherwise…..

MR HUTLEY:   In that regard, I do not think we necessarily need to respond to it then, other than to make this point; it is this.  The position taken by Mr Kirk is at odds with the position taken by my learned friend, Mr Izzo.  The position taken by my learned friend, Mr Izzo, is effects‑driven and once one looks at the nature of the power, in our respectful submission, it must ultimately be – and it will not be informed by the approach taken on the notice of contention.  But I will allow Ms Shepard to say something shortly on the notice of contention, if I might.

KIEFEL CJ:   Yes, Ms Shepard.

MS SHEPARD:   May it please the Court.  Mr Kirk says the appellants’ only purpose is to pursue damages, that was a submission made earlier in the course of address, and that is, it is suggested, their motive, and all that is relevant.  The appellants’ purpose was the subject of a finding in the court below, and this is set out at paragraph 15 of our submissions, and also is found at Court of Appeal book 128, paragraph 129 of the judgment.  But if I could take your Honours shortly to paragraph 15 of the submissions, the finding was that the appellants’ predominant purpose in seeking the issue of the examinations summons was to investigate and pursue a personal claim in their capacity as shareholders against Arrium’s directors or auditors.  That purpose has not been challenged.  There is no finding on the appellants’ purpose otherwise.

Now, ground 3 of the notice of appeal sets out the legislative condition or object to which we say our purpose relates.  What appears to be the complaint is that the appellants’ purpose, as found, aligns too closely with the scope of the process sought to be invoked, that is, it is suggested by my learned friend that the appellants’ purpose does no more than describe the scope of the process sought to be invoked, and is therefore circular.  In my respectful submission, it is not circular, it is why, on an abuse of process case, the appellants are not committing an abuse.

Now, the second respondent’s main contention on the notice of contention is that, on an abuse of process case, the subjective purpose is determinative.  By extension, that means that a person seeking to invoke the process must have the subjective purpose of seeking to benefit the company and its general body of creditors.

Now, if that is the case, then that must apply to every eligible applicant.  My learned leader has already addressed the range of eligible applicants – these include creditors – and what the authorities show is a disinclination to impose that requirement on creditors.  Specifically, Justice Lander at paragraph 262 of Evans v Wainter, which is at volume 4, at 771 of the joint book of authorities, determined the application before him was not an abuse because it would result in a benefit to the company.

Now, on the second respondent’s case, this approach is wrong because we are…..in the territory of abuse of process.  However, if we are looking at that subjective purpose, then the putative creditor also lacks it.  Now, the second respondent says this lack of coherence is resolved by the court affirming that a subjective purpose of conferring benefit is determinative and that is the eligible applicant who is a problem if he or she lacks that required subjective intention.  The appellants say the incoherence is resolved by not construing the requirement for the reasons already stated on appeal.

Now, I do not need to take your Honours’ time any further, that is the short point.  There has been discussion about whether we are construing a condition on the exercise of power or whether we are in the territory of abuse of process.  It matters not which way we go if the subjective purpose is one always implied of requiring benefit to the company and creditors.  Unless there is anything further to assist your Honours, those are our submissions.

KIEFEL CJ:   Yes, thank you, Ms Shepard.  The Court reserves its decision in this matter and adjourns to 9.45 am tomorrow.

AT 3.09 PM THE MATTER WAS ADJOURNED