Walton & Anor v ACN 004 410 833 Limited (formerly Arrium Limited) (in liquidation) & Ors

[2021] HCATrans 18

[2021] HCATrans 018

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S151 of 2020

B e t w e e n -

MICHAEL THOMAS WALTON

First Applicant

ANTHONY BOGAN

Second Applicant

and

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

First Respondent

KPMG

Second Respondent

COLIN GALBRAITH

Third Respondent

Application for special leave to appeal

GAGELER J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 11 FEBRUARY 2021, AT 12.42 PM

Copyright in the High Court of Australia

____________________

MR N.C. HUTLEY, SC:   I appear with my learned friend, MS J. SHEPARD, for the applicants.  (instructed by Banton Group)

MR M.A. IZZO, SC:  If your Honours please, I appear with my learned friend, MR T.E. O’BRIEN, for the first respondent.  (instructed by Arnold Bloch Leibler)

MR P.D. HERZFELD, SC:   I appear for the second respondent, with my learned friend, MR A.B. EMMERSON.  (instructed by Ashurst Australia)

GAGELER J:   Mr Hutley.

MR HUTLEY:   As your Honours appreciate, Arrium raised over $750 million in capital, including from my clients.  Shortly after, that is, in a matter of months, Arrium wrote down its assets by $1.3 billion, which effectively wiped out the value of the shares and thereafter – a relatively short time thereafter – went into administration.  As a result of a deed of company arrangement, creditor claims by the applicants and others in their position who bought shares were barred.  We say it would be an obvious matter of public interest that such a drastic reduction of value should invite examination of the circumstances which brought about a capital raising in such close proximity to it in time. 

ASIC authorised the applicants to make an application under 596A.  The sections, your Honours will find set out in the judgment in the application book at page 86.  That authorisation has not been challenged.  An application to the court was then made in respect of a Mr Galbraith, a former director with roles in Arrium’s governance committee and audit committee.

GAGELER J:   You want to sue the directors and you want to sue KPMG?

MR HUTLEY:   We want to, in effect, conduct examinations with a view to considering whether the circumstances would justify an action against the directors and/or the auditors.

GAGELER J:   And do you contend that that would be of any benefit to the company?

MR HUTLEY:   I am prepared to concede at the moment for present purposes, as the Court of Appeal held, it is unlikely to be of any benefit.  I cannot say that it would have been of benefit, but I accept for the purposes that it was unlikely to be of benefit to the company because the company tells us – and that is the interesting thing about this case – they do not want an investigation of these circumstances.

GAGELER J:   And no benefit to the creditors?

MR HUTLEY:   No, I cannot put that it is of benefit to the creditors.  It could of course theoretically disclose material going to insolvent trading, which might be, but for present purposes let it be assumed that that is unlikely and the company has an attitude which they express of not wanting it to occur.  We say that is why this is a perfect vehicle to truly examine what we say has become, through a process almost of sedimentary advancement, a series of principles governing the legitimate purposes which result in the statement of principle at paragraph 140, the new statement of principle of the Court of Appeal.  It says:

It follows there are two unanimous decisions of the Full Court of the Federal Court which state that an examination, the predominant purpose of which is not to benefit the corporation, its creditors or contributories –

And we will come to that; no one has ever said until this moment all its contributories:

is an abuse of process.  None of the other cases to which we have referred have stated that Re Excel was incorrectly decided.  Furthermore, they can all be reconciled –

That is referring to certain dicta by, inter alia, Justice Hayne when sitting in Victoria, as to a broader purpose.  I will come to that:

Furthermore, they can all be reconciled on the basis that even if the examination was brought by an eligible applicant for its own purpose, that will not be foreign to the purpose for which the power was conferred if it can be shown that the fulfilment of the purpose could confer a demonstrable benefit on the company or its creditors (and possibly on all of its contributories).

So, in effect, what the Court of Appeal has said is that the only proper purpose is a purpose which must necessarily benefit the company.  That is in substance what is being determined.  We say that cannot be right as a matter of law. When you go to the definition of “eligible applicant”, eligible applicant includes ASIC, so ASIC would not have to have that purpose.  Secondly, ASIC can authorise a person, and why can ASIC not authorise a person for a purpose which ASIC could have undertaken?

EDELMAN J:   Does the question not come down to the underlying purposes of section 596A?

MR HUTLEY:   Precisely.  Section 596A has not been considered and it is new because it is a mandatory provision, as your Honours appreciate.  It is a provision - once the conditions of operation have been satisfied, one essential one of which includes a person authorised by ASIC to conduct it, then the court must summons a person.  In all other situations the court had a discretion.  This is a must.  The other people identified in 596A are, as it were, the classic eligible persons or the classic individuals whose purpose one would not usually investigate, namely, liquidator administrator, administrator, et cetera. 

What we say is in a 596 case, ASIC having chosen as an instrument my client whose aim is not act for themselves alone - it is with a view to starting a class action for a significant section of the contributories of the company whose value was wiped out within minutes, we say, consistent with statements such as by Sir Anthony Mason in Hamilton v Oades.  The relevant passages your Honours will see are at application book 93, paragraph 53.  We say why, we ask rhetorically, is it an improper purpose for this power to be used to investigate with a view to a possible claim for a significant section of the contributories who may have been in effect harmed as a result of potentially egregious breaches of law?

GAGELER J:   The shareholders for whose benefit this potential claim might be brought were persons who bought shares at a particular time.

MR HUTLEY:   Quite.

GAGELER J:   Not necessarily the shareholders at the time of liquidation.

MR HUTLEY:   Not necessarily, no, but there is no doubt that it could include those shareholders and others who bought on the basis of the market which produced those shares as well.  In other words, what we say is why is it a foreign purpose to this section in respect of a company which has gone into insolvency, where the company has no interest because it has been the beneficiary, potentially, of a large wrongdoing, where ASIC says, “I authorise you to act, cognisant of the fact that you will be acting on behalf of a potentially significant section of people who have suffered from it and suffered from it through becoming contributories to the company”?

One asks rhetorically what in the section mandates a conclusion that that is an improper purpose?  We say that no court has considered the implications of the relationship between ASIC being an eligible person and ASIC being able to appoint other people to do something which ASIC could do.  We have also referred to the fact that ‑ ‑ ‑

EDELMAN J:   But if your submission is correct, why should it matter that any individual is bringing the action or is seeking the information and the examination to bring an action in order to bring a class action?  Why would it not be sufficient for an individual to seek the examination for their own purposes?

MR HUTLEY:   It may be, and that again raises the interesting question as to the status of ASIC’s role in approving.  That is why I started by saying there is no challenge to ASIC’s decision to appoint us – none.  It is not said that that was for an improper purpose.  It is not saying that that was beyond its role.

GAGELER J:   ASIC, as an administrative agency, surely cannot authorise what would otherwise amount to an abuse of process.

MR HUTLEY:   Let me assume ASIC had been told by an applicant to ASIC, “We are doing this for you to go at cross-examination of witnesses in a suit we are inevitably going to bring”.  Of course ASIC could not approve - if ASIC approved that act, that would be an illegitimate purpose in what it is doing.  In other words, it would be approving something which was for an abuse of process.  This case rose up for determination by this Court.  What we say the fundamental question is, what is the true scope and purposes of this legislation when viewed through the context of ASIC’s role and ASIC being given a power to choose people to pursue it?  Look at these facts.

GAGELER J:   So the presence of ASIC is what distinguishes this provision from its predecessors, is it?

MR HUTLEY:   ASIC existed under the predecessors, but no one has concentrated, with respect, in our respectful submission, as a result -  and it goes back from Hamilton v Oades because it was not called for at the High Court level at that stage - to look at the position of ASIC and the position of its exercise of power when choosing someone, as we say, to investigate a matter which is of general public importance, and even choosing an individual whose purpose is a purpose to investigate with a view to bring forward a suit which would vindicate wrongs of a significant section of the purpose, but also of course make available to the world information about the circumstances, which could also be available, for example, by ASIC.

Let it be assumed great perfidy and wrongdoing was produced in the course of that examination. Why, one asks rhetorically, could not ASIC say, “We might have investigated, but here comes somebody who is armed to do so, willing to expend their money to do so, et cetera, and true it is, their aim is to vindicate rights of a significant section of the capital of this company; we choose those people to do that”.  But the Court of Appeal would say that is, by definition, an improper purpose.

We say there is nothing in the legislation which examines that, and no one, no court, and certainly not this Court, has fully properly, with respect, analysed the significance of this dual role of ASIC, and the fact that, particularly under a modern example of regimes such as administration where, like here, you could have a situation like this:  great wrongdoing, potential, unidentified, scheme of arrangement, barring clause, events come to arise, somebody seeks to vindicate an inquiry, not for some illegitimate cross‑examination purposes, not to, as it were, harass directors, not to get an advantage on cross‑examination - to make an investigation as to whether it is legitimate and justified to bring an action in respect of potentially a grave wrongdoing, and ASIC determines to approve that.

EDELMAN J:   Mr Hutley, it might be a different case, might it not, if for example Ms Banton had said in her affidavit that one of the purposes for which this is sought is to further ASIC’s interests.

MR HUTLEY:   But your Honour, that exactly shows the difficulty.  Can I take you to the example of the creditor who gets approved.  He or she is seeking purely to vindicate his or her personal right, has no interest to protect the company, does not care about it, but the courts have said that is all right because you do, if you are right, potentially advance the interests of the company.  So, in other words, even though the person who is moving forward has what is quintessentially a private purpose, because the outcome could, as it were, vindicate the public object, that is sufficient to remove from a characterisation of their purpose as being illicit, as it were.

Why, one asks rhetorically, if my client’s purposes are private - and we do not accept they are private; as we say in our submissions, that is an unhelpful question‑begging characterisation because they are acting in the broader interest - but let us use that terminology.  ASIC has chosen to use us as a vehicle to investigate something of public interest.  That could be disclosed, and in effect it seems to be accepted it could be disclosed.  There could have been terrible wrongdoing.  Why is that not then non‑illicit?  That is not explained, and that goes back to the statement of Sir Anthony Mason as to the important public character of these.

What we say is that this Court has not had an opportunity to consider holistically these provisions.  There has been a growing up within the intermediate appellant courts of different dicta, and you will have seen the reference to the statements of Chief Justice Gleeson in the Court of Appeal, and Justice Hayne which are referred to at paragraph 136 at page 123 of the application book where the Court of Appeal says true it is their statements were from a much broader variety, but because of the circumstances of the case we will read them down.  We say that those statements were considered statements, and they are correct. 

GAGELER J:   What about the two Full Federal Court decisions?

MR HUTLEY:   We say with respect to those Full Federal Court decisions they have not dealt with the issue in a holistic way.  You can see that with respect to what was said in the judgement of the Full Court.  I will just get the statement of Justice Lander, paragraph 110 where, as it were, 10 statements of principle are set out.  Now, we venture to suggest, when you read those, they are rather a disparate collection, with all due respect to his Honour, which has never dealt with or considered what we are putting. 

GAGELER J:   As to what exactly you are putting, the proposed grounds of appeal are relatively lengthy.  Is there one point?

MR HUTLEY:   It is essentially one point.  I am prepared – as we have said, you could have a debate about what our purpose was from Ms Banton’s affidavit.  We are prepared to accept the characterisation.  The end we were seeking to achieve was to elicit information with the view to commencing a class action on behalf of the section.  We say that is a perfectly appropriate purpose.  That is why – that is how it was characterised in effect by the Court of Appeal and they called it a private purpose.  We say that is an analysis which begs the question. 

GAGELER J:   You say that was a purpose - it is a legitimate purpose?

MR HUTLEY:   It is a legitimate purpose. 

GAGELER J:   And as I understand it, it is sought to be captured at page 132 paragraph c?  I just want to be clear about this.  This in your application. 

MR HUTLEY:   Yes.  That is in essence ‑ ‑ ‑

GAGELER J:   That is really your case?

MR HUTLEY:   That is really the case, we say, and that requires, we submit, an examination by this Court who have not looked at this question

form a purpose point of view since Sir Anthony Mason in Oades, and that was not directed to this broader question, and since then it has been looked at from a constitutional view, and this is the vehicle to determine whether the section is basically sterilised, we say, in the way that the Court of Appeal has sterilised it at paragraph 140, by even to the extent they doubt whether you can act on behalf on contributories unless it is every contributory.  As we point out, that is never going to occur, virtually, because directors who you will be after will generally be contributories, and it is not even going to apply usually if it is just all creditors, because there will be preferential creditors, and preferential creditors will have no interest.  I see the time, your Honours.  Thus we say this is the perfect vehicle to determine an important question.

GAGELER J:   Mr Izzo.

MR IZZO:   May it please the Court, can I invite your Honours to go, if your Honours have it, to the supplementary application book, commencing at page 16.  There is a statement of claim which was filed on 14 August 2020, two weeks after the Court of Appeal’s judgment and orders.  By that statement of claim, the applicants brought the proceeding which their affidavits in support of the examination summons stated they wished to investigate.  I am not going to take your Honours through it, but your Honours can accept that that pleading over 122 pages articulates in considerable detail a case against the auditors and four directors of Arrium alleging misleading and deceptive conduct in connect with the publication of the FY14 and FY15 financial results and the re‑publication of those results in materials submitted to investors in connection with the capital raising. 

The significance of that development which, as I have said, came after the Court of Appeal’s decision, is that it places any appeal to this Court on a highly unsatisfactory basis.  For a start, your Honours cannot look at it because your Honours are confined in an appeal in a strict sense to what was before the Court of Appeal.  This could never have been before them because it had not even happened. 

But the further difficulty is this, that it is an artificial prism through which to look at this case because this development provides Arrium with a fresh and strengthened basis to bring an application alleging there is an abuse of process by the continuation of the examination, if nothing more because the articulation of a very clear case raises a real question as to whether our friends need this summons at all, and the cases recognise that where proceedings have been commenced the likelihood of an abuse of process, at least, increases.  Whether or not that is so, the reality is that if your Honours grant special leave and allow the appeal, that is not the end of this matter, and it will be conducted against the actual facts in any fresh application.

EDELMAN J:   What do you say though in response to the issue of principle that is involved not necessarily for these parties but for other future parties and, in particular, do you accept that if ASIC, for example, wanted to investigate serious wrongdoing in a company, it would not be open to it to authorise a contributory to conduct examinations for the purpose the contributory has of furthering future proceedings even though ASIC’s own purpose would fall squarely within the provision?

MR IZZO:   In my submission, ASIC’s purpose is irrelevant unless ASIC, of course, is bringing it under its own statutory right to obtain the summons.  The fact that ASIC has authorised someone to be an eligible applicant is just a statutory step, but the ultimate answer to your Honour’s question, in my submission, is this - and it is what the Court of Appeal found - that it depends entirely on the applicant’s purpose.  So if the purpose of the applicant, as is the case here, has nothing at all to do with exposing misconduct, it is just not what they are trying to do, then the case falls very clearly within the abuse of process.

EDELMAN J:   Why is ASIC’s purpose irrelevant?

MR IZZO:   Because it is the person obtaining the summons who is using the process.  ASIC is not using the process of the Court, unless, as I said ‑ ‑ ‑

EDELMAN J:   ASIC is authorising the use of the process.

MR IZZO:   Yes, but that is just a statutory precondition.

GAGELER J:   Mr Izzo, can I go back to the point that you started with and try to understand how you put the significance of the new proceedings.  Do you say then that the relief that is sought in the notice of appeal that would be filed in this Court would be inutile in some way?

MR IZZO:   Well, it would be inutile because it could not stop a fresh application being brought by us based on the fresh facts.

GAGELER J:   What is sought, I think, is a restoration of the order of Justice Black.

MR IZZO:   Yes, the examination would proceed, in effect.

GAGELER J:   Would proceed?

MR IZZO:   If our friends agreed an examination would proceed subject to us bringing, as I have said ‑ ‑ ‑

GAGELER J:   Seeking a variation ‑ ‑ ‑

MR IZZO:   Well, bringing a fresh application.

GAGELER J:   ‑ ‑ ‑ or bringing a fresh application in the light of changed circumstances.  So I do not see how it is an answer to the question of principle.

MR IZZO:   It arises in two ways.  The question of principle we say for other reasons which I will come to, just does not arise in this case anyhow, but it just affects the utility of the exercising.  It is a reason why leave should not be granted. 

GAGELER J:   In this particular case.

MR IZZO:   Yes.  It calls into question whether our friends really need it.  Now, of course your Honours could consider a question of principle if your Honours thought it arose which, for reasons I will explain, we do not think it does of course, but in our submission that is not a reason your Honours would grant special leave.

Can I turn to the other matters.  Our friends say that there is some significance in the formulation at paragraph 140 of the Court of Appeal’s judgment to all contributories.  Can we just explain to your Honours immediately why that is misconceived.  The reference to all contributories does not mean - could not mean that every contributory must benefit.  It reflects nothing more than what the Court of Appeal recorded at paragraph 32 on application book 84, in the last sentence of about line 50, that what is being referred to is the contributories as a class.  It must mean that, just as creditors means creditors as a class.

GAGELER J:   That does not mean all creditors, does it?

MR IZZO:   It does not mean all creditors, no, not at all.  Our friends suggest that by referring to “all” in paragraph 140, the Court of Appeal has introduced a new test.  That is not the case at all.

GAGELER J:   You have to read 140 with 141, have you not?

MR IZZO:   Quite.

GAGELER J:   Yes.

MR IZZO:   Yes, and it is not the contributories of the class, is the short point.  Our friends are not the contributories as a class.  That is why the Court of Appeal considered that ‑ ‑ ‑

GAGELER J:   Some contributories.

MR IZZO:   Yes, but not because they are contributories.  This is, in a sense, the Sons of Gwalia.

EDELMAN J:   Not because they are contributories at the time of liquidation.

MR IZZO:   No, they are only litigants.  They are only members of the class because they claimed they acted on the basis of misleading conduct on the part of the company and, as this Court explained in Sons of Gwalia, that has nothing to do with your capacity as a shareholder.  It may be that you bought shares, but you might not be a shareholder at all.  It just does not have anything to do with it.

But there is a broader problem.  If our friends wish to run this point, the notion of creditors and contributories, what I think they call a “gloss” in their written submissions, is wrong, there still remains a question for your Honours as to whether the case could nevertheless succeed.  There are two problems.  First of all, it is not the way they ran it below because the way the case was run below, in effect, accepted this test as the correct test.  Your Honours see that in two places.  Your Honours see it in the Court of Appeal judgment at 115 where, at about line 20, there is a reference to Justice Hayne saying that power must be used for a purpose that is not foreign to the power.  Then the second‑last sentence refers to advancing “an interest provided by the legislative framework”, and then the last sentence, the submission was 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 –

So the way the case was formulated was that you do not need to worry about our purpose if you can find a benefit.  That is the answer to the paradox that my learned friend, Mr Hutley, said, well, what about these cases where the creditors’ purpose is irrelevant, but they might swell the pool of assets?  That is how the case was put.  Your Honours see that, also, at 92.

GAGELER J:   Was that the only way the case was put?

MR IZZO:   Yes, and you can see it at 92.  There were two – I will just show your Honour the other bit, 92, which is the broader proposition that:

“[t]he obtaining of answers to otherwise unanswered questions . . . can, in a broad sense, be regarded as amounting to a benefit to the company, its creditors or contributories, and as therefore fulfilling a purpose –

Our friends had two points.  They said, first, there is a benefit to the company because we investigated the capital raising and there might have been a loss from the capital raising.  That is gone.

GAGELER J:   They have lost that; that is gone.

MR IZZO:   That is gone.  The second point was what your Honours are now hearing, which is there is also this broader benefit of exposing misconduct which, as your Honours see in 92, they put through the prism of benefiting the company, its creditors and contributories.  That submission was dealt with by the Court of Appeal at 136 by saying, well, none of the cases say that just because you expose misconduct, that is enough.  It has to be about your actual purpose, and their actual purpose here was to pursue their private action, and that is the end of it.  But none of this involved a challenge to the formulation – creditors, contributories, and the company – and so the juristic basis for this whole notion and what the purposes are just was not explored below.

The difficulty is that if your Honours were to explore it, the obvious starting point, our friends accept that the power has to be exercised for the purpose for which it is conferred.  They accept in the application book in their reply at the bottom of 213 and 214 that you cannot use the power for certain purposes such as examining “a potential defendant in defamation proceedings”.  What they do not articulate is where the line is to be drawn.  If you tried to do that, one would start, as your Honour Justice Gageler did in Palmer v Ayres, and as Chief Justice Gleeson did in Hong Kong Bank v Murphy, and say this power is about the external administration of the company.  It is about aiding the external administration.

GAGELER J:   Mr Izzo, I appreciate this point very much and it is really why I was asking Mr Hutley to identify in crystalline terms what the legitimate purpose was.  I think he has achieved that.

MR IZZO:   Well, the difficulty is this - if that is what you are trying to do, the difficulty is that you still have to be able to say that this is their purpose, and you cannot say that because the findings of the Court of Appeal and indeed below – 129 in the Court of Appeal, but it is uncontroversial – is that it has got nothing to do with their purpose.  This is not what they are here for.  They have not come to throw light on the affairs of the company.  They expressly conceded below, and that is referred to again at page 214 of the application book, line 8:

The Applicants conceded that they were not “subjectively” seeking to bring the application for that purpose –

What they are referring to is two lines above - exposing unlawful conduct.  That is not their purpose.  Their purpose is obviously to bring their class action.  As the Court of Appeal found, when you are dealing with abuse of process you must look at the purpose, not at the result, like exposing the affairs of the company and, so long as they are the findings of fact, whatever test our friends adopt or persuade your Honours to adopt, they cannot succeed.  That is ultimately why this is not a suitable vehicle to explore whatever questions of principle our friends say arise.

There is also – our friends refer to the fact that section 596A is mandatory in comparison to some other powers.  This particular issue was dealt with and foreshadowed as long ago as 1920 in Dowling v Colonial Mutual Life Assurance Society Limited 20 CLR 509, which is referred to at great length in Re Excel, the decision of Justices Gummow, Hill and Cooper.

At page 520, Sir Isaac Isaacs pointed out in the context of a sequestration order where the Court must - under the Victorian statute had to make the order, “adjudge the debtor to be bankrupt”, if the statutory criteria were fulfilled, and the point was made as far back as then that even under that mandatory form of statutory provision where there is:

a collateral and improper purpose was held sufficient to induce the Court to refuse to make an order. 

That is at page 520.  The notion that you cannot use these principles of abuse of process just because the power in 596A is mandatory could not be right and, as we say, is far from new.  The final point is that, once you reach that position that I have articulated as to the applicant’s purpose and it not conforming to any notion of exposing misconduct, it does not matter who they are representing.  In a funny way what happened in the Court of Appeal and the reason why this notion of benefit to the creditors, contributories and so on was referred to is because the way in which the matter was put and the way I have shown your Honours at 115 was to say, well, you do not have to worry about purpose if you can show a benefit.  That is exactly what the Court of Appeal picked up at paragraph 140 in the passage that is challenged.  So, in paragraph 140 at line 50, the sentence beginning “Furthermore, they can all be reconciled” - this is the Federal Court cases:

they can all be reconciled on the basis that even if the examination was brought by an eligible applicant for its own purpose, that will not be foreign –

if there is a benefit, was really what our friends had put as a way of getting them out of this problem that they did not have the right purpose.  It is not the Court of Appeal erecting some new test as the starting point.  It is simply not what was happening.  The case had to fail simply because, on the facts, the applicants could not demonstrate the purpose that they needed in order to overcome the problem of abuse of process.  They are our submissions.

GAGELER J:   Thank you, Mr Izzo.  Mr Herzfeld, do you wish to add something?

MR HERZFELD:   Yes, if I might do so relatively briefly.  Could your Honours please take up the application book page 79.  At page 79 paragraph 15 is quoted part of the affidavit of Ms Banton relied upon by the applicants in support of their application for examination orders.  Your Honours will see at the beginning of quoted paragraph 40, the first sentence refers to assisting with the determination of whether to bring proceedings.

Now, of course, following the decision of the primary judge and that of the Court of Appeal those proceedings were in fact commenced, and Mr Izzo has taken your Honours to those in the supplementary application book.  May we note that those proceedings were instituted on 14 August 2020.  They were not served on KPMG until 2 November 2020, until after all submissions from this application had been made.  That is why your Honours find no reference to that in the written submissions in relation to the application.  There is no explanation before this Court as to the timing of that statement of claim but in light of its filing, may we make four points. 

The first is that, as Mr Izzo has said, because of the applicant’s choice as to the timing of that statement of claim, this Court would be put in the position of deciding the appeal in a factual universe that no longer reflects reality, and that makes this matter an inappropriate vehicle in which to consider any point of principle.  That is the first point.

The second point is that the applicant’s choice as to the timing of that statement of claim gives rise to an acute prejudice to the respondents.  That is because, if your Honours look, again at the quote from Ms Banton’s affidavit on appeal book 79, the fact that the lengthy and detailed statement of claim has been filed without any examination taking place raises a question about that evidence.  Evidently, the examination was not necessary to determining whether the claims had sufficient prospects of success to warrant pursuing them.  That being so, the question which we would have asked, had we known that the statement of claim was capable of being filed, is whether that evidence was correct and complete.

So, had the statement of claim been filed earlier, the respondents would have had the opportunity at trial to explore that evidence in cross‑examination but, because of the applicant’s choice as to the timing of the statement of claim, the respondents were denied that opportunity.  That is a prejudice which cannot now be remedied and, in my submission, it is a prejudice that should not be compounded by the grant of special leave.  It is a reason why the interests of justice do not favour a grant of special leave.  That is the second point.

The third point is that the filing of the statement of claim at this point does indeed cast doubt on the whole basis of ASIC’s grant of eligible applicant status to the applicants, which is a point to which Mr Hutley drew attention.  To demonstrate that, could your Honours please turn to appeal book page 77.  Your Honours will see there set out part of the letter written by the applicants to ASIC, and at the top of page 78 it said that:

The purpose of the examinations would be to investigate the potential for claims to be made –

and so forth.  Your Honours will also notice what is said at paragraph 9.  The departure from the basis put to ASIC is now quite stark.  Not only is the examination sought of a person not mentioned in that letter to ASIC, but a proceeding has now been instituted.  The claims are no longer potential, they are real, and your Honours will see back at appeal book page 15 in the reasons of the primary judge in paragraph 17 in the first three lines that ASIC inquired expressly of the applicants as to why any examination would not be an abuse of process.

Now, the considerations for ASIC at this point would be quite different as the proceedings have been instituted.  The fact that ASIC granted the applicants eligible applicant status on a basis which is radically different from that which now obtains, is, again, entirely due to the applicant’s choice as to the time of filing of that statement of claim, and a case where the basis of the applicant’s very standing to bring the proceeding and in which ASIC’s approval is, at least from Mr Hutley’s arguments today, to be a central feature, it is not suitable in those circumstances for special leave to be granted when the basis of that approval is radically different from the factual universe which now obtains.  That is the third point.

The fourth and final point that we would make is this.  In circumstances where the expressed purpose of seeking the examination of Mr Galbraith has fallen away, a real question does arise as to why these applicants are pursuing this application.  Now that the proceeding has been instituted in the Supreme Court of Victoria, the applicants have available to them the usual curial processes of that court.  So in relation to KPMG, for instance, the applicants can look to those processes to obtain production from KPMG of the kind that they sought in aid of the examination summons of Mr Galbraith. 

There is nothing before this Court to explain why, in those circumstances where the express purpose was to investigate whether a claim should be brought - now that a claim has been brought, there is nothing before the Court to explain why these applicants have any interest in that question other than in seeking to displace the costs order made against them below.  That of itself suggests that this is an inappropriate vehicle in which to consider any question of principle.  Those are the four matters that we would seek to add to the submissions of the first respondent.

GAGELER J:   Thank you.  Mr Hutley.

MR HUTLEY:   Can I deal with the last matter raised first.  If your Honours go to paragraph 3 of the judgment of the Court of Appeal at application book 76, your Honours will see the date of the raising – 3 September 2014.  Any cause of action would probably have arisen at or about that date.  If your Honours go to the supplementary book, page 6, 19f ‑ ‑ ‑

GAGELER J:   You have got a limitation problem, you are saying?

MR HUTLEY:   Yes.

GAGELER J:   That is the explanation for the ‑ ‑ ‑

MR HUTLEY:   Exactly, and it was clear ‑ ‑ ‑

GAGELER J:   Well, given that, it is said that the landscape has change.

MR HUTLEY:   But the suggestion by my learned friend, Mr Herzfeld, that we had in effect no explanation, the reason why we had to file was because otherwise their conduct in taking this point and advancing an argument that it is improper would have ultimately served the end of destroying any possibility of an action.  So, as the cases have often shown, it is not improper to start a suit and then do this, particularly when you are confronting a limitation point, and because of the need with the limitation point to plead the very best case you can, you have to put it out in every possible detail you can, or otherwise you will run into a problem of trying to amend when the circumstances – so it is passing ironic, and if there were ever a suit seeking to set this aside as an abuse, we would be in effect submitting that their approach was an abuse because it was calculated to take advantage of their behaviour in driving us to this situation, to put us in this situation. 

So that is what – now can I deal with the question, which is more substantive, of purpose.  Firstly, my learned friend, Mr Izzo, said we ran some limited case.  That is simply not correct.  He did not take your Honours to paragraph 115, where our case was put. 

Senior counsel for the respondents referred to Marvin Manufacturers.  . . . He submitted that Hayne J explained at 616 that the question was whether the coercive powers in s 596B were to be used for “a purpose foreign to the purposes for which those powers are conferred”.

And that is our very case here.  He went on to say, “He also referred”, et cetera.  That is why the court said we were relying on a broader statement of principle, by Justice Hayne, and they read it down.  That is why we say the purpose is the purposes I have advocated, and our learned friends appear to accept that they are legitimate purposes.  They say then but in point of fact our purpose was particular, and we say we are exactly the same situation as the creditor case.  The creditor’s case is particulars for his, her, or its personal benefit, but if they objectively can achieve the objective purpose, namely, of disclosing the wrongdoing, then the purpose is not foreign, even though you might say it is an individual purpose.

EDELMAN J:   But is that because the purpose could be characterised as ASIC’s purpose?

MR HUTLEY:   No, as a purpose consistent with the purpose of the Act, namely, the investigation to disclose wrongdoings, which ASIC could have done.

EDELMAN J:   Yes.

GAGELER J:   Mr Hutley, you say that the relief you seek in the notice of appeal still has utility and ‑ ‑ ‑

MR HUTLEY:   Totally.  All our learned friend says is your Honours should refuse special leave because we will bring another application, and we will be there to meet the other application, and we will have a degree of confidence of success because of the matters we indicate.  Your Honours

take the point.  I think that basically deals with the two points, your Honours.  That is all I wanted to say.

GAGELER J:   Yes, thank you.  We will retire for a moment to consider the course that we will take.

AT 1.31 PM SHORT ADJOURNMENT

UPON RESUMING AT 1.33 PM:

GAGELER J:   There will be a grant of special leave to appeal in this matter.  Mr Hutley, you should give some attention to your grounds of appeal and you should formulate them in a way that incorporates the concessions that you made in the course of your submissions.

MR HUTLEY:   We will, your Honour.  Were there to be a division between the two interests, our learned friends’ and ours, we could easily do it in a day, I would have thought - a division of time by reference to interests.

GAGELER J:   Yes, I was about to ask you about time.  Thank you.  Very well, the Court will now adjourn until 2.00 pm.

AT 1.34 PM THE MATTER WAS CONCLUDED