ASIC v Karl Suleman Enterprises; Application of Stoliar [2003] NSWSC 163 | Case summary

What happened

Karl Suleman Enterprises Pty Ltd (KSE) ran an investment scheme which, according to the liquidators' investigations, raised roughly $140 million and paid back at least $71 million to investors ([2]–[4]). The company lacked reliable records and many transactions involved cash. The liquidators (respondents) conducted extensive public examinations under Part 5.9 of the Corporations Act to reconstruct the company's transactional history and to identify potential recovery avenues for creditors; by the time of the interlocutory application they had conducted around 51 days of examinations ([6]–[7]).

Nati Stoliar was examined publicly on two occasions (21 June 2002 and 13 September 2002) pursuant to a summons. At the end of each of those examinations the Deputy Registrar stood the examination over generally with liberty for the liquidator to restore on 14 days' notice, and ordered that if it was not restored within six months it would be deemed concluded, the usual practice in the registry ([8]–[9]). Later Stoliar was served with an order for production and produced documents (in response) on 17 February 2003; the respondents were given access to them on 24 February 2003 ([10]). The liquidators asked for a further examination in light of material discovered; Stoliar's solicitors objected and sought particulars and, ultimately, made an interlocutory application seeking orders to set aside the examinations and to return produced documents ([11]–[14]).

Austin J heard Stoliar's application and resolved two main questions: (1) whether the Court had the power to stand over an examination generally with liberty to restore (including adjournment sine die), and (2) whether, in the circumstances, the resumption of Stoliar's examination should be prevented on discretionary grounds or because a fresh affidavit should have been produced to justify resumption. He dismissed Stoliar's application and refused the return of the produced documents, reserving costs ([46]–[47]).

Why the court decided this way

Statutory interpretation and balancing of competing interests drove the decision.

Statutory text and construction: Austin J concentrated on s 597(17), which permits the Court to "adjourn the examination from time to time" ([28]). Read together with the provisions that require a summons to specify a place and time (s 596D) and the Court's power to give directions (s 596F), the Court concluded that adjournment necessarily includes resumption at a different time/place and that s 597(17) authorises adjourning an examination generally, even sine die, particularly where the adjournment is limited by a liberty to restore with a finite limitation period (for example, six months) ([27]–[30]). Re von Dembinska and Re Southern Equities were cited as authority for such an understanding of adjournment powers ([29]–[30]).
Practical policy reasons: the Court acknowledged the nature of complex liquidations in which evidence emerges piecemeal from multiple sources, often after an initial examination. If liquidators were required to file a full new affidavit each time they sought to recall an examinee, investigations would be rendered costly, slow and inefficient. That practical reality weighed in favour of permitting resumption without an automatic fresh affidavit requirement ([24]).
Supervisory and discretionary power preserved: despite the broad construction of s 597(17), the Court emphasised its supervisory role to prevent abuse. The Court may, on application by either party, order termination, restriction or require further affidavit justification where fairness to the examinee demands it ([25], [41]). Thus there is no blanket rule requiring fresh affidavit material; rather, the need for further disclosure is a case-by-case exercise of judicial discretion ([41]).
Application to facts: Stoliar had produced documents, after his earlier examinations, that on their face disclosed matters meriting further inquiry (examples included payments involving Kimberley Securities Ltd and Fobeca Pty Ltd) ([37]–[38]). There was no persuasive evidence that the respondents acted from an improper purpose, or that further examination would be oppressive, vexatious or constitute harassment. Accordingly, the balance of interests favoured allowing resumption ([42]–[44]).
Protections preserved: the Court read s 597(6) (obligation to attend) together with s 597(17), explaining that an examinee's duty to attend applies in relation to the adjourned date when properly notified; insufficient notice could amount to a reasonable excuse under s 597(6A) ([31]–[33]). The costs protection in s 597B (power to order costs where a summons was obtained without reasonable cause) remained available; permitting adjournment did not nullify that protection ([33]).

In summary, the Court adopted a purposive construction of the adjournment power, applied practical policy reasoning about the realities of insolvency investigations, preserved supervisory safeguards, and concluded the liquidators were entitled to resume Stoliar's examination on the facts before the Court.

Before and after state of the law

Before: The relevant statutory scheme already contained the adjournment provision s 597(17) and the protective provisions (eg, s 596C for affidavits supporting an initial summons, s 597B for costs). There was some authority suggesting adjournments could be broad (Re von Dembinska; Re Southern Equities), but tension existed between the idea of an examination as a single event (suggested by the requirement in s 596D to specify place/time) and the practical need to resume examinations.

After: Austin J clarified that s 597(17) should be given a broad construction that allows the Court to adjourn an examination generally with liberty to restore, including adjournment sine die where there are limiting conditions, and that the adjournment power can operate without a fresh affidavit in every case. Crucially, the decision preserves the Court's discretion to demand further affidavit evidence or to terminate or limit resumed examinations where fairness requires. Practitioners therefore know that resumed examinations are authorised, but that judicial supervision can be invoked where adjournments appear abusive, repetitive, or prejudicial.

Key passages with plain-English translation

"[I]n my opinion s 597(17) makes it clear that the Court may make orders permitting the resumption of the examination at a date and time other than those specified in the summons…" ([28]). Plain English: The Court can pause an examination and bring it back later even if the original summons named a different time or place.
"If it were necessary for liquidators to make a fresh application whenever they wished to resume the examination... the cost and time of liquidators' investigations would be increased significantly." ([24]). Plain English: Requiring a new affidavit every time would unreasonably slow and raise the cost of liquidation inquiries.
"It is open to the Court to require that the liquidators provide some evidence justifying continuation of the examination process if the circumstances of the case make it appropriate to do so." ([41]). Plain English: The Court can, where fairness demands, insist the liquidator explains why a recall is needed.
"In the present case there is no basis for contending that the respondents have been motivated by an improper purpose, or that the further examination would be oppressive..." ([43]). Plain English: On these facts the liquidators were acting properly, not vindictively or unfairly, so the examination could continue.

What fact patterns trigger this precedent

This decision is most directly engaged where:

A liquidator has conducted an initial public examination and the examiner or registry has made an order standing the examination over generally with liberty to restore (the common practice in the NSW registry) ([8]).
New documents or information are produced after an initial examination that appear to raise additional questions or reveal new transactions worthy of inquiry (eg, late production of documents identifying payments or unusual transactions) ([37]–[38], [44]).
The liquidation investigation is complex, involves incomplete records and cash transactions, and therefore requires iterative lines of inquiry that may require recalling examinees ([7], [24], [42]).
An examinee claims harassment, oppression, or that recall is improper but the liquidator can show a reasonable basis to ask further questions and no improper purpose can be demonstrated ([43]).

Conversely, if an examinee shows repeated, arbitrary recalls without any new evidence, or demonstrates prejudice due to inadequate notice or oppressive repetition, a court may exercise its supervisory jurisdiction and restrict or terminate the resumed examination. The decision emphasises a fact-sensitive balancing process rather than a rigid rule.

How later courts have treated it

This judgment applies well-established authorities (eg, Re von Dembinska, Re Southern Equities) and situates itself between procedural safeguards and practical necessities of insolvency work. Austin J expressly followed and relied on past authorities and confirmed that where new material justifies further questioning, resumption is legitimate ([29]–[30], [42]–[44]). The decision is cautious in preserving the Court's power to require fresh affidavit material in appropriate cases ([41]–[46]). Practitioners should expect later courts to apply the same balancing approach: permit resumed examinations where new evidence exists and where liquidators' investigations reasonably justify recall, but intervene where recalls are manifestly oppressive, unjustified, or lack fair notice.

Still-open questions

Threshold for requiring fresh affidavit: Austin J held there is no automatic requirement but that the Court may order one in appropriate circumstances ([41]). What specific facts will push a court to require a fresh, detailed affidavit remains case-specific; subsequent applications will shape clearer standards about the quantity and quality of new material required.
Limits on repeated recalls: Austin J acknowledged a point may be reached where repeated recalls require more specific justification ([45]). The case does not define the number or frequency of recalls that would trigger judicial intervention; future cases will need to articulate when repetition becomes oppressive.
Interaction with s 597B cost orders: while Austin J held s 597B remains an available protection ([33]), the practical circumstances in which costs will be awarded against a liquidator after a resumed examination has been permitted are not exhaustively explored here.
Notice and reasonable excuse under s 597(6)/(6A): Austin J recognised inadequate notice could constitute a reasonable excuse to fail to attend ([32]). The judgment does not set detailed standards for what constitutes sufficient notice for an adjourned examination stood over generally; subsequent fact patterns will illuminate acceptable notice practices.

Conclusion: ASIC v Karl Suleman Enterprises; Application of Stoliar establishes and confirms a pragmatic, purposive approach to adjournments of liquidators' examinations, broadly permitting standing over generally with liberty to restore, while preserving the court's discretion to protect examinees from unfairness.

JUDGMENT (revised for typographical errors 18 March 2003) 1 HIS HONOUR: The respondents are the liquidators of Karl Suleman Enterprises Pty Ltd ("KSE"), by resolution of the creditors at a meeting convened under s 439A of the Corporations Act. They are also the receivers, by appointment of the Court, of a fund relating to an investment scheme in which KSE was involved. 2 KSE was incorporated in December 1999. Its primary business was raising funds from investors with a promise to pay significant returns to them over time. KSE raised approximately $140 million from investors, according to the respondents' investigations. Those investigations also reveal payments made back to investors by KSE of at least $71 million. The latter figure is likely to increase as the respondents receive more bank statements from investors which record payments from KSE into their accounts. However, it appears that many investors in fact received payments in cash, and further investigation will be required to estimate more accurately the total amount of money paid back. 3 The evidence of the respondents is that KSE offered investment contracts to investors on the basis that the investor would receive a fixed return (usually on a fortnightly basis) for a period which was predetermined under the contract. KSE conducted the business of collecting trolleys at airports. Investors were informed that they were investing in the trolley collection business and/or other investments which KSE made from time to time. Although the investment contracts made by KSE were not identical, a common feature of all of them was the pre-determined return for a specific investment. For example, some of the investment contracts warranted that the investor would receive $5,000 per fortnight for five years for a $100,000 investment. 4 It appears that the trolley business and various investment businesses operated by KSE were far too insignificant to meet its obligations under the investment contracts, because of the high rate of return KSE promised to investors. The respondents say that the investment scheme was clearly unsustainable, and that investors' returns were primarily paid by the money coming in from subsequent investments. 5 KSE was operated under the control, direction and management of its director, Karl Suleman. The scheme was not registered under the managed investment provisions of the Corporations Act. The respondents say that Mr Suleman essentially treated the funds invested as his own moneys. 6 As part of their investigations into the collapse of KSE and its investment scheme, the respondents have conducted, so far, 51 days of public examinations under ss 596A and 596B of the Corporations Act. These have largely been examinations of agents of KSE who promoted and conducted the investment scheme, professional advisers to the scheme, people involved in related companies set up using KSE funds, and others who have been able to provide relevant information in relation to transactions in which KSE was involved or interested. 7 In his affidavit filed for the purposes of the present application, one of the respondents (Mr Paul Weston) gave the following explanation of the importance of the examination process to the respondents' investigations: "Due to the nature of the scheme, our investigations have been hampered by a lack of company documents and documentation of transactions, coupled with the fact that many transactions involved cash elements which complicates the reconstruction and tracing exercise. In light of this fact, the public examination process has been invaluable in assisting us to reconstruct the transactional history of KSE and allows us to consider possible avenues of recovery against individuals who have been involved directly or indirectly with KSE." 8 One of the examinees was Mr Nati Stoliar. Mr Stoliar was publicly examined on 21 June 2002, pursuant to an examination summons issued on 24 April 2002 under s 596B, and then again on 13 September 2002. At the conclusion of each of those examinations, Deputy Registrar Wearne stood the examination over generally with liberty for the liquidator to restore it on 14 days' notice, and ordered that if the examination was not restored within six months it would be deemed to be concluded. The parties before me agreed that it is the usual practice in this Court to make orders in these terms at the conclusion of the examination. 9 At the conclusion of the examination on 13 September 2002, counsel for the liquidator said to the Deputy Registrar: "I have completed the examination of Mr Stoliar. Thank you, Mr Stoliar. If the summons could be stood over generally, Registrar … and a direction made in relation to speaking to others about evidence. Thank you, Registrar." 10 Mr Stoliar was served with an order for production dated 2 December 2002, and eventually produced some documents to the Court on 17 February 2003. Despite his objections, access to the documents produced by him was granted to the respondents on 24 February 2003. 11 The respondents' solicitors wrote to Mr Stoliar on 19 November 2002, notifying him that he would be required for further examination in the week beginning 9 December 2002. Mr Stoliar's solicitors responded on 6 December 2002 saying that Mr Stoliar would be absent from the jurisdiction at that time and again from Christmas to late January, and suggesting that his further examination be postponed to 17 February 2003. The letter asserted that "this third recall for examination borders on harassment", but said that Mr Stoliar's instructions were that he was prepared to be examined again on 17 February. 12 There was further hostile correspondence, including a letter from Mr Stoliar's solicitors to the respondents' solicitors dated 14 February 2003, in which they asserted that an affidavit by the respondents must be filed to explain why a further examination of Mr Stoliar was necessary, and to identify any new material that may have come to their attention to justify the further examination, and to explain why the subject matter of the proposed examination could not have been dealt with in the earlier examinations. The respondents' solicitors replied on 17 February 2003, asserting that it was not appropriate to outline the matters upon which Mr Stoliar would be examined, except to say that the questions would concern transactions relating directly or indirectly to KSE, as to which the respondents believed Mr Stoliar had or might have knowledge. 13 Mr Stoliar made an interlocutory application for orders setting aside the orders for examination and production of documents, and for other relief. In its amended form, the interlocutory process seeks in the alternative an order that the respondents return all copies of the documents produced by Mr Stoliar on 17 February 2003 pursuant to the order for production. 14 In support of this application, counsel for Mr Stoliar has made submissions of two kinds. His primary submission is that the statutory examination procedure does not authorise examinations whenever the liquidator chooses to make an appointment with the Court for that purpose, and in particular, the legislation does not authorise the additional examination that is proposed in this case. Additionally, counsel for Mr Stoliar submitted that further examination would be futile because his client had no more information to provide, and that the liquidator did not have any clear view of what he wanted to establish, and consequently the process could be productive of harassment. The liquidator's authority to conduct further examinations once examination has taken place 15 Part 5.9 of the Corporations Act sets up a procedure under which an eligible applicant may move the Court for the issue of a summons for examination of a person about a corporation's examinable affairs. The definition of "eligible applicant" in s 9 includes a liquidator. Section 596A provides for the examination of an examinable officer of the corporation. Section 596B provides for the examination of a person if an eligible applicant applies for the summons and "(b) the Court is satisfied that the person: (i) has taken part or been concerned in examinable affairs of the corporation [as defined in s 9] and has been, or may have been, guilty of misconduct in relation to the corporation; or (ii) may be able to give information about examinable affairs of the corporation." 16 As counsel for Mr Stoliar emphasised, these provisions place a large power in the hands of liquidators and other eligible applicants, subject to the Court's supervision, and those powers are not to be exercised lightly having regard to the effect on examinees. Counsel referred to Re North Australian Territory Company (1890) 45 Ch 87, where Bowen LJ said of a predecessor provision (at 93): "In the first place, it must be observed that it is an extraordinary section. It is an extraordinary power; it is a power of an inquisitorial kind which enables the Court to direct to be examined - not merely before itself, but before the examiner appointed by the Court - some third person who is no party to a litigation. That is an inquisitorial power, which may work with great severity against third persons, and it seems to me to be obvious that such a section ought to be used with the greatest care, so as not unnecessarily to put in motion the machinery of justice when it is not wanted, or to put it in motion at a stage when it is not clear that it is wanted, and certainly not to put it in motion if unnecessary mischief is going to be done or hardship inflicted upon the third person who is called upon to appear and give information." 17 The same approach is exhibited in cases concerning the equivalent bankruptcy procedures, where it has been emphasised that "for the reason that mischief or hardship might result from a misuse of the power to compel and conduct an examination the courts have been at pains to point out that care should be exercised before ordering an examination and that vigilance must be observed by those overseeing an examination to ensure that no injustice occurs": Clark v Wood (1997) 78 FCR 356, 358, per Finkelstein J, citing Karounos v Official Trustee (1988) 19 FCR 330, 335. 18 Where an examination is sought under s 596B, the eligible applicant's application for the issue of the summons must be supported by a confidential affidavit, as required by s 596C. In Re Southern Equities Corporation Ltd (in liq); Bond v England (1997) 25 ACSR 394, Lander J (with whom Cox and Bleby JJ agreed) rejected a submission by a liquidator that the contents of the affidavit could be supplemented by the provision of material information orally at the hearing of the application for issue of the summons. He said (at 428): "In my opinion s 596C makes it mandatory upon an applicant for an examination summons pursuant to s 596B to file an affidavit in support of the application which discloses all those matters material to the exercise of the master's discretion. That means the liquidator has an obligation to depose to all matters which support the application and all those matters which the liquidator is obliged to bring to the master's attention in fulfilling his obligation to make full disclosure." 19 Counsel for Mr Stoliar has submitted that the protection to examinees afforded by s 596C, so interpreted, would be substantially diluted if the examination could be adjourned in the manner proposed by the liquidators in this case. He submitted that, just as the liquidators must make a proper case for the issue of the examination summons in the first place, it should be incumbent upon them to make a fresh case if the examination has been conducted and subsequently the liquidators wish to resume. 20 There is force in this argument, but it must be qualified by some well-established principles concerning the examination process and the examinee's right to information. The examination process serves the public interest by enabling the liquidator to gather information which will assist in the winding up: Hamilton v Oades (1989) 166 CLR 486, 496 per Mason CJ; Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512, 519 per Gleeson CJ. The fact that the liquidator uses the examination procedure to gather evidence in connection with proceedings he contemplates bringing, or has decided to bring, or has already brought, does not make his use of the process illegitimate: Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537. 21 The examinee is not entitled to advance notice of the questions to be asked. In Re Robert Sterling Pty Ltd [1979] 2 NSWLR 728, Needham J said (at 731-2): "It would, of course, be very convenient for a witness if, when the question was asked of him, he either had the right to have it put in writing or the right to discuss it with his solicitor or counsel. It is likely, in such a procedure, that frankness would be at a premium. The liquidator, where an order has been made for the examination of a witness … is entitled, in my opinion, subject to the normal rights of a witness to object to answer questions the answers to which might incriminate him, to have the witness' immediate answer to a question. "Everybody who has practised the law knows that in cross-examination truth will out on some occasions when it would not if the questions were, in effect, dribbled to the witness either orally or in writing. I think the whole function of s 249 would be utterly frustrated if the witness were entitled, except in the most extraordinary circumstances, either to have conferences with his counsel or solicitor about questions or to have such questions delivered to him in writing." 22 Similarly, in Re Qintex Group Management Services Pty Ltd [1997] 2 QdR 91 at 95, McPherson and Pincus JJA and Derrington J compared the practice of oral examinations with the older procedure by the administration of interrogatories, noting the "notorious defects" of the old procedure and observing that "to deny to liquidators the use of the procedure for examination in litigation would deprive it of most of its practical utility". In MacPherson v Sherman [2001] NSWSC 68 Palmer J, applying the observations of Needham J quoted above, rejected an application for the examinee's lawyers to have a prior opportunity to study documents that were intended to be referred to in the examination. 23 The submissions raised on behalf of Mr Stoliar raise an important issue about the conduct of liquidators' examinations. The Court is required to balance considerations of fairness to the examinee against the public interest and interests of creditors represented by the liquidator: see Re Equiticorp Finance Ltd; Ex parte Brock (1992) 10 ACLC 382, especially at 385-6 per Young J. One must weigh up the extraordinary nature of the examination power, the effect of its application on examinees, and the risk of misuse of the power, against the interests of creditors and the community generally in effective, efficient and inexpensive investigation of the affairs of failed companies. 24 If it were necessary for liquidators to make a fresh application whenever they wished to resume the examination of a particular examinee, and therefore to prepare a fresh affidavit, the cost and time of liquidators' investigations would be increased significantly, especially where the investigation was a complex and large one. As Mr Weston's evidence in this case makes clear, a complex investigation will have many interlocking strands, and information discovered by pursuing one line of investigation may shed light on another line of investigation, making it desirable to resume that other line of investigation by recalling examinees. Additionally, if an examinee himself produces documents after the conclusion of his initial examination, further examination may be warranted in light of them. It seems to me that the balancing process must pay due regard to these considerations. 25 In my view, the law gives to the Court a discretionary jurisdiction which permits it to supervise the process and prevent abuses. Either the liquidator or the examinee may approach the Court for orders or directions where controversy arises in the administration of the examination procedure. On the application of an examinee, the Court may determine that an adjourned examination (especially one that has been frequently adjourned or adjourned over a long period of time) should not be allowed to resume either at all, or without the provision of a further affidavit. In Karounos (at 335 point 7) the Full Federal Court, dealing with the comparable bankruptcy jurisdiction, remarked that such an application "will usually be determined on a broad view of the issues in the particular case and a weighing of competing principles". 26 Mr Stoliar contends for a proposition of law that would limit the Court's supervisory power. He says that the Corporations Act prevents any general adjournment or standing over the examination with liberty to apply, whatever considerations of fairness and convenience might dictate. I would be reluctant to conclude that the provisions of the Corporations Act have this effect, because an absolute proposition of that kind would tilt the balance excessively against liquidators and interests they represent, and limit the Court's discretion to supervise the process in a more precise way. In my opinion, Part 5.9 of the Corporations Act does not support the contention by counsel for Mr Stoliar. 27 Several provisions of Part 5.9 might, if read in isolation, be taken to imply that the examination will be a single occasion. Thus, under s 596D(1) the summons must require the examinee to attend before the Court "at a specified place and at a specified time on a specified date, being a place, time and day that are reasonable in the circumstances". Section 596F(1) authorises the Court to give various directions at any time. They include a direction about the matters to be inquired into at the examination and a direction about the procedure to be followed at the examination, perhaps suggesting a single event. Under s 596F(3) a person must not contravene such a direction. 28 However, those provisions must be read together with s 597(17), which authorises the Court, if it thinks fit, to "adjourn the examination from time to time". In my opinion s 597(17) makes it clear that the Court may make orders permitting the resumption of the examination at a date and time other than those specified in the summons as required by s 596D. It is in the very nature of an adjournment that the hearing resumes at a place and time other than the place and time stipulated in the summons for the initial hearing. Any directions as to the matters specified in s 597 would apply to the continuation of the examination after an adjournment, where appropriate. 29 I see no reason for giving s 597(17) a restricted interpretation. I disagree with the submission of counsel for Mr Stoliar that the power to adjourn the examination "from time to time" takes its meaning from s 596D, so that the adjournment must be to a specified place and a specified time on a specified day. The concept of "adjournment" extends beyond adjournment to a specified date, to encompass adjournment sine die. Such an order was made, relying on the power in s 597(17), in Re Southern Equities Corporation Ltd (in liq); Caboche v England (1998) 72 SASR 186. In my opinion the concept also encompasses an order standing the application over generally, with liberty to restore - at any rate where there is a supplementary order having the effect that the liberty to restore expires after the expiration of a stated period, so that the adjournment process is subject to a limitation period. In Re von Dembinska [1954] 1 WLR 748 an order was made adjourning the public examination of a debtor under bankruptcy legislation which authorised the court to adjourn the examination "from time to time". The order was that the examination be adjourned generally with liberty to the debtor to have it restored. The English Court of Appeal held such an order was authorised by the legislation. 30 In Re Southern Equities Corporation Ltd (in liq); Caboche v England Debelle J rejected a contention that an order by a master that an examination resume under an examination summons issued over two years earlier was a fresh examination posing as a continuation. He held (at 194) that the master's order was plainly not an order for a fresh examination, because the master made it expressly clear that his intention was for the examination under the existing summons to resume. Counsel for Mr Stoliar submitted that this case should be distinguished on the ground that the resumption was pursuant to an order of the Court, upon affidavit evidence. However, Debelle J (at 197-198) rejected a submission that the examination was a new examination because the liquidator's application to the master was supported by an affidavit. It is clear from his Honour's reasoning that he would have regarded the resumption of the examination as authorised if the liquidator has simply approached the Court registry for an appointment to resume the examination, rather than approaching a master for an order. 31 Counsel for Mr Stoliar placed some reliance on s 597(6), which states: "A person who is summoned under s 596A or s 596B must not intentionally or recklessly: (a) fail to attend as required by the summons; or (b) fail to attend from day to day until the conclusion of the examination." 32 In my opinion s 597(6) must be read together with the power of adjournment in s 597(17). Where the Court orders an adjournment of the examination and the examinee is properly notified of the adjourned time, date and place, s 597(6) applies to require the examinee not to intentionally or recklessly fail to attend at the time and place so specified, unless the examinee has a reasonable excuse as allowed for by s 597(6A). Insufficient notice of the date, time and place of resumption of the examination may well constitute a reasonable excuse within that provision. 33 Section 597B provides an important protection for the examinee. It authorises the Court to order that some or all of the costs incurred by the examinee be paid by the applicant or any person who took part in the examination, if the Court is satisfied that the summons was obtained without reasonable cause. Counsel for Mr Stoliar submitted that if adjournments of the kind contended for by the liquidator in this case were permitted, the protection afforded by s 597B would be diluted or removed, because the liquidator would not be required to state the cause for obtaining an examination at the adjourned time. In my opinion this submission does not adequately take into account the existence of the express power of adjournment in s 597(17). Nor, in my opinion, does it follow from the fact that a fresh affidavit is not required for the adjournment (unless, of course, the Court so orders) that there will be no evidentiary basis for the Court to determine whether the examination has proceeded without proper cause. 34 Counsel for Mr Stoliar submitted that his client was entitled to treat the examination process as concluded on 13 September 2002, because on that occasion counsel for the liquidator informed the Deputy Registrar that she had completed the examination of Mr Stoliar. It must be noted, however, that having made that statement, counsel immediately asked for an order that the summons be stood over generally, and the Deputy Registrar took that as a request to make an order in accordance with the usual practice, granting the liquidators liberty to restore on 14 days' notice within the ensuing six months. In the circumstances, counsel's statement appears to mean no more than that the examination process on that day had come to an end and there were no further questions to ask, but the position of the liquidators was reserved by the request for an order, made by the Deputy Registrar in the usual terms. 35 Finally, counsel for Mr Stoliar placed some reliance on rules 11.5 and 11.10 of the Corporations Rules. I agree with him that the rules contemplate that, after an examination summons has been issued and an examination has taken place, the Court may issue another summons requiring the examinee to attend afresh. However, the fact that there is such a power does not imply that the first examination summons cannot be adjourned, having regard to the express wording of s 597(17). 36 In my view, therefore, the Court had the power under s 597(17) to make the order made by the Deputy Registrar in this case. The remaining question is whether there is any ground for the Court to set aside the order or otherwise terminate the examination process, or to require that a fresh affidavit be filed to support the further examination of Mr Stoliar. Mr Stoliar's challenge to the resumption of the examination 37 In his affidavit Mr Weston says that the liquidators' investigations reveal that Mr Stoliar, and companies in which he has a direct interest (namely Kimberley Securities Ltd and Fobeca Pty Ltd), had a number of dealings with Mr Suleman and/or KSE and related companies, including Froggy Holdings Pty Ltd. Pursuant to the order for production, Mr Stoliar produced, in July 2002, a facsimile to him from Peter Scown dated 27 June 2002, enclosing documents relating to payments made by Mr Suleman and/or KSE to Kimberley Securities Ltd and Fobeca Pty Ltd. The documents reveal that in relation to various transactions KSE and/or Mr Suleman paid $1.14 to Kimberley Securities and $505,000 to Fobeca. 38 Mr Weston's affidavit, filed in response to Mr Stoliar's application, proceeds as follows: "18. Examination of Mr Stoliar on two previous occasions has not resulted in Mr Stoliar's examination being completed. Because KSE lacked any or any reliable records of transactions, information about transactions must often be gleaned from other sources and various examinees. As further information and documents come to light, it is sometimes necessary to recall examinees for the purpose of getting their evidence concerning such documents and information. It has also been necessary to limit examination about particular issues or transactions in the interests of making the most efficient use of the available time to conduct the examination, having regard to the overall scope of the examination and the considerable number of other matters which also require prompt investigation. "19. I am of the view that further examination of Mr Stoliar will greatly assist investigation into transactions which involved Karl Suleman and/or KSE. Mr Stoliar has knowledge of transactions which involve a significant amount of money and because of the lack of KSE company records, the nature of those transactions is less than clear. Mr Stoliar's assistance is crucial in understanding the company's rights in relation to those transactions." 39 Mr Stoliar complains that this is insufficient disclosure concerning the proposed further examination, and that the respondents have refused to disclose anything more specific. His solicitors wrote to the respondents' solicitors on 14 February 2003 requesting written advice as to the matters about which the respondents proposed to examine Mr Stoliar, and why there was a need to do so having regard to the prior examinations that had taken place. They said that to support the further examination of Mr Stoliar, the liquidators were required to file a further affidavit explaining why additional examination was necessary, what new information had come to their attention to justify that examination, and why they were not able to deal with it on the prior occasions. 40 The respondents' solicitors replied on 17 February 2003, asserting that it was not appropriate to outline the matters upon which Mr Stoliar would be further examined, except to say that the questions would relate to transactions relating directly or indirectly to KSE, in respect of which the liquidators believed Mr Stoliar had or might have knowledge. They referred to Needham J's remarks in the Robert Sterling case, quoted earlier in this judgment. 41 My conclusion in the earlier part of this judgment implies that there is no general obligation on liquidators to supply a fresh affidavit, where an examination has been adjourned, to justify its resumption. However, it is open to the Court to require that the liquidators provide some evidence justifying continuation of the examination process if the circumstances of the case make it appropriate to do so. 42 My assessment is that in the present case, considerations of fairness to the examinee do not require the respondents to provide further evidentiary justification of their proposed course of action. It is particularly significant that Mr Stoliar produced information warranting further investigation pursuant to the order of production, well after the first examinations occurred. It is also reasonable for liquidators in such a complex and large investigation as the present one to resume an examination of a particular examinee in light of information they may have obtained in other aspects of their inquiry. As counsel for the respondents submitted, such an investigation is like completion of a jigsaw puzzle, which must be assembled piece by piece. 43 In the present case there is no basis for contending that the respondents have been motivated by an improper purpose, or that the further examination would be oppressive or vexatious or constitute harassment. The respondents have initiated proceedings in this Court, number 2329 of 2002, seeking to extend a caveat they have lodged in respect of land at Bunn Street Pyrmont, of which the registered proprietor is Metro Apartments Pty Ltd. Several drafts of the statement of claim in those proceedings have been prepared, and in one version (apparently not the current one) Mr Stoliar and his two companies were named as parties. That evidence falls well short of establishing any impropriety or oppression. The case law cited above makes it clear that proceedings against the examinee, commenced or contemplated, do not prevent the liquidator from conducting the examination. In the present case it is not even clear that the examinee or his companies will be a party to the proceedings, let alone that the liquidator will attempt to use the examination process for the purpose of those proceedings. 44 Mr Stoliar submitted that he had provided all of the information that he could provide at the previous examinations and in response to the order for production, and he asserted that he had no further information to give. What is obvious from the history of the matter is that Mr Stoliar has produced some documents, which appear on the face of them to identify matters warranting further investigation. He has produced these documents well after his previous examinations and only under compulsion and after substantial delay. In the circumstances, my view is that the respondents should be given the opportunity to ask Mr Stoliar some more questions to determine whether he can provide further assistance, and it would be premature for the Court to conclude at this time that he has no further information to give. 45 Mr Stoliar submitted that, unless the area of intended questioning is disclosed, he may be unable to answer questions at the further examination, and it may then be necessary to conduct a fourth examination. I agree that a point may be reached beyond which the liquidators should not be allowed to proceed without providing a more specific justification than they have given so far. In my view, however, the balance of considerations does not require that a further justification be given at this stage, even though the resumption of the examination implies that a further date or dates may also be required. 46 In the course of submissions, counsel for the respondents took me to particular parts of the exhibits before the Court which, he submitted, justify further questioning. I do not propose to set out these submissions. Although they were presumably made on the respondents' instructions, they do not reflect Mr Weston's affidavit evidence. If I had been of the view that the liquidators were required to justify further examination, it would not have been adequate for this to occur through counsel's submissions. Just as the affidavit of a liquidator under s 596C should be complete and should not be supplemented orally at the hearing (Re Southern Equities Corporation Ltd (in liq); Bond v England, cited above), so an affidavit purporting to justify further examination should contain the full justification and the liquidators should not rely on counsel's submissions for supplementation of their case. In the present case, however, no grounds have been identified for the Court to interfere with the resumption of the examination, and further justification by the liquidators is not required. Conclusion 47 In my view Mr Stoliar has failed to establish any ground for the Court to intervene to prevent the resumption of the examination proposed by the respondents. This conclusion implies that his challenge to the order for production also fails, subject to one point. Mr Stoliar submitted that some joint venture documents produced in answer to paragraphs 9 and 17 of the Further Summons to Produce have no relevance to the affairs of KSE and should be returned. I am not able to conclude at this stage that the documents have no such relevance, and therefore this submission also fails. Mr Stoliar is not entitled to an order for the return of documents that he has produced. 48 The application should therefore be dismissed. I shall hear the parties on the question of costs.

ASIC v Karl Suleman Enterprises; Application of Stoliar

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