Ausmedic Australia Pty Ltd v Whiteley Medical Supplies Pty Ltd [2013] NSWSC 538 | Case summary

Judgment 1By Amended Interlocutory Process dated 12 April 2013, Angas Securities Limited ("Angas"), Mortgage Funds Management Limited ("MFM") and Mr Matthew Hower seek, inter alia, orders that Mr Jeffery Herbert, as liquidator ("Liquidator") of Owston Nominees No 2 Pty Limited (in liq) (recs and mgrs apptd) ("Owston") be restrained from engaging a law firm, Hudson Law, to act in relation to any summons for examination under ss 596A and 596B of the Corporations Act 2001 (Cth). Corresponding relief is also sought against Hudson Law restraining that firm from acting. Orders are also sought setting aside a summons for examination addressed to Mr Hower and orders for production addressed to Angas and MFM. Factual background 2An important aspect of the background to this application is the existence of proceedings in the Family Court of Australia ("Family Court proceedings") in which a director and shareholder of Owston, Mr Warren Anderson, and receivers and managers ("Receivers") appointed by Angas are taking opposed positions. Hudson Law represents Mr Anderson in the Family Court proceedings as well as acting for the Liquidator in respect of the orders for production and the examination summons. 3There is a dispute in the Family Court proceedings as to the effectives of a settlement between the trustee of a trust known as the Atom Trust and the Receivers, which contemplates that certain monies would be paid to the Receivers. The Liquidator points out that Mr Anderson is not a potential beneficiary of the Atom Trust, although he has the role of "protector" of that Trust and has the capacity to remove and appoint its trustee, which he cannot presently exercise by reason of orders made by the Family Court. The Liquidator contends that Mr Anderson does not stand to benefit if the settlement is interrupted. Nonetheless, Mr Anderson is plainly vigorously pressing rights in respect of the Atom Trust in the Family Court proceedings. Whether or not he stands to gain a direct financial benefit from setting aside the settlement, it must be inferred that his active resistance to the settlement is prompted by a perception that it is in his broader interests, or alternatively in the interests of his children as beneficiaries of the Trust, that the settlement not take effect, and this seems to me to give rise to a substantive interest in the result. Angas contends that the position adopted by Mr Anderson in the Family Court proceedings would reduce the assets available to Owston and its creditors (or, more precisely, to Angas pursuant to its security) and is adverse to the interests of Owston and also to the interests of Angas. I will return to issues arising from the Family Court proceedings and Hudson Law's role in them below. 4The Liquidator was appointed as liquidator of Owston on 12 November 2010. In the period after his appointment, the Liquidator made several attempts to obtain information from Angas and MFM prior to seeking the issue of the orders for production and the examination summons. Angas is a secured creditor of Owston and holds a charge over the whole of its assets and undertaking securing an indebtedness which it claims exceeds $30 million. MFM is also a secured creditor of Owston, holding a charge over the whole of its assets and undertaking including a mortgage security over a property known as Fernhill which it claims secures an indebtedness of approximately $29.9 million. 5On 18 November 2010, the Liquidator wrote to Angas and MFM requesting that they advise of the following in relation to their secured charges over Owston: - "Any assets that have been realised to date; - The amount Owston owes under the charges; - The dates the charges were registered; - Any assets the charge's [sic] were secured over; - Any payments you received from Owston since 2 January 2010." 6By a further letter to Angas dated 2 December 2010, the Liquidator noted the absence of response to the earlier letter; noted that the Receivers had advised they could not provide the information the Liquidator had requested; and requested specified information in relation to the appointments of receivers and copies of relevant documentation. That letter noted that the request was made under s 530B of the Corporations Act and that, if the information was not provided by a specified date, the Liquidators would make an application under s 530C of the Corporations Act for orders requiring that the information be provided. By letter dated 20 January 2011, solicitors then acting for Angas noted their client's understanding that the majority if not all of the relevant documentation and information had been provided by the Receivers and set out certain information relating to the loans made by Angas to Owston. On 7 February 2011, the Liquidator gave notice to MFM under s 530B(5) of the Corporations Act requesting specified information and drawing attention to s 530B(2) of the Corporations Act which required the secured creditor to provide specified information to the Liquidator. 7By letter dated 4 April 2011, the Liquidator sent a facsimile to Mr Warren Anderson, then a director of Owston, which stated relevantly, that the Liquidator had not received a response to a further letter sent on 7 February 2011 to, relevantly, MFM and that: "We have got to the point at which further inquiries are pointless without a Court order forcing compliance or at the very least; a solicitors' letter, further queries would be water off a ducks' back. As you know, we do not have the funds required to meet the costs of obtaining the Court Order and are therefore powerless." 8Also on 4 April 2011, the Liquidator purported to authorise Mr Anderson, as one of Owston's shareholders, and his solicitors to request specified information in order to assist with his investigations into Owston's affairs and financial circumstances, including the amounts owing to specified creditors; how those amounts were made up; and any other information that the Liquidator would be able to compel any officer of the relevant creditors to disclose during the course of examination under s 596B of the Corporations Act. The letter purported to authorise and direct its recipient to provide any such information to Mr Anderson or his solicitors on request. This was, of course, a very substantial purported delegation of the Liquidator's powers to a third party. That letter was disclosed in the application for issue of the examination summons. 9Mr Anderson's then solicitors then wrote to Angas and MFM seeking information in respect of the loans. Angas in turn responded by letter dated 10 May 2011 which did not accept that the Liquidator could delegate the right to require the provision of information to Mr Anderson or his solicitors and did not provide such information. MFM took the same approach. 10On 23 November 2012, the Liquidator wrote to MFM seeking information in relation to the loans and it responded by letter dated 30 November 2012 stating the amount owed to MFM, details over assets subject to its security; the default interest rate of 30% per annum, and the payout figure as at that date. That was a substantially narrower range of information than that requested by the Liquidator and did not include, for example, details of assets secured and realised or the proceeds received from realisations or details of the receivers' fees and costs or how the receivers intend on realising remaining assets. 11At the Liquidator's request, the Court issued a summons for examination addressed to Mr Hower under s 596B of the Corporations Act and orders for production addressed to Angas and MFM on 6 March 2013. The application for an issue of examination summons was supported by an affidavit of the Liquidator dated 19 February 2013, which was read in these proceedings. That affidavit drew attention to the fact that the Liquidator was informed by Mr Anderson that Angas was proposing to sell some of the Fernhill property, which Mr Anderson contended would have an adverse affect on a proposal for a major subdivision of that property; and that, if the subdivision was able to proceed, it would result in sufficient monies being realised to repay secured creditors and further funds would be available for Owston's use. This evidence was admitted as evidence of what Mr Herbert was informed but not as evidence of its truth. The Liquidator's affidavit then indicated, correctly, that information had not been provided by Angas and MFM despite numerous requests to them and stated that: "It is imperative that full information is made available and all documentation be checked to ensure that Owston is properly liable to pay any monies to the Defendants. When the information is forthcoming I shall then be able to assess the level of interest rates charged by the Defendants and consider whether or not the rates are unconscionable and liable to review and adjustment under the Corporations Act 2001 (Cth) or generally at law. This information is also necessary to make a full assessment of the feasibility of being able to continue with the proposed sub-division and sale of lots at Fernhill, an important purpose of which is to repay all appropriate indebtedness to creditors. I am concerned that the Defendants have not been forthcoming with the information I requested and that was requested on my behalf and therefore that something untoward may have occurred or may be occurring in regard to their security or the way in which securities may have been sold or are being disposed of and this needs to be fully investigated in the interests of other creditors of Owston and in my role as the Official Liquidator of Owston." 12By letter dated 22 March 2013 sent by its solicitors to the Liquidator, Angas sought to require that the Liquidator immediately cease his retainer of Hudson Law and discharge the examination summons and order for production. By email dated 25 March 2013, the Liquidator advised Angas that he had obtained independent legal advice and did not agree that there was a conflict, and stated that the examination summons was for a proper purpose and that, had Angas provided the requested information, the examination would not have been necessary. Application to restrain the Liquidator from engaging Hudson Law and to restrain Hudson Law from acting 13As I noted above, Angas, MFM and Mr Hower seek orders that the Liquidator be restrained from engaging Hudson Law to act in relation to any summons for examination under ss 596A and 596B of the Corporations Act and corresponding relief against Hudson Law. Angas, MFM and Mr Hower, in the alternative, seek an injunction restraining Hudson Law from acting for the Liquidator in respect of relevant examination summonses in the Court's inherent jurisdiction. (For completeness, I should note that Angas, MFM and Mr Hower acknowledged, In the course of submissions, that it is unlikely to be necessary for the Court to grant injunctive relief, as distinct from allowing the Liquidator and Hudson Law an opportunity to act in accordance with the Court's observations as to their entitlement to act in the orders for production and examination, where there is no suggestion that the Liquidator and Hudson Law would not act in accordance with the Court's observations in that regard.) 14I first address the facts surrounding the retainer of Hudson Law in respect of the orders for production and the proposed examination of Mr Hower. It is common ground that the Liquidator is represented, in respect of the application for the examination and the orders for production and in respect of the examination itself by Hudson Law, who also act for Mr Anderson in the Family Court proceedings. Although Owston is a respondent in the Family Court proceedings, Mr Hudson's evidence is that Hudson Law does not act for Owston in those Court proceedings and that there has been no appearance by Owston in those proceedings since at least 27 July 2012. 15Mr Hudson's evidence is that Hudson Law's retainer for the Liquidator is limited to these proceedings. The work to be performed is set out in the firm's costs disclosure as: "Advising and acting on your behalf in respect of the Proceedings, including the preparation of an application for the issue of summonses for examination and orders for production against each of the defendants, and advising and acting on your behalf in respect of all interlocutory matters in the proceedings and at the examination hearings." It will be noted that that retainer apparently does not extend to advising Mr Herbert in respect of the liquidation generally. Mr Hudson's evidence is that he has explained to the Liquidator that the Liquidator's interests in the disputed assets in respect of the Atom Trust (to which I referred above) are different to Mr Anderson's interests in the Family Court proceedings. 16Mr Hudson's evidence was initially that he was informed by the Liquidator that he sought to engage Hudson Law because Mr Anderson had suggested that the firm may act on the liquidator's behalf without being guaranteed payment and that, unless such an agreement could be reached, Owston would not be in a position to commence the relevant applications since it did not have the necessary funds to do so. Mr Hudson subsequently corrected his first affidavit to indicate that Mr Short, who he understood to be a friend of Mr Anderson's, had suggested to the Liquidator that Hudson Law may act on his behalf without being guaranteed payment. It appears that Mr Short is also an adviser to Mr Anderson in respect of the Family Court proceedings. Angas, MFM and Mr Hower respond to the Liquidator's reference to lack of funding by contending that there is no evidence of funding inquiries being made of creditors. While that is correct, it seems to me that any proposition that Angas or MFM, as secured creditors of Owston, would have funded investigations to elicit the information which they had previously failed to provide to the Liquidators is implausible, and there is no suggestion that unsecured creditors are likely to do so. 17Mr Hudson's evidence was also that he was informed by the Liquidator and believed that the Liquidator had obtained independent legal advice as to whether a conflict arose as a result of Hudson Law acting for him in these proceedings and Mr Anderson in the Family Court proceedings and, based on such advice, the Liquidator did not believe that it was inappropriate for Hudson Law to continue acting for him in these proceedings. There was no further evidence of instructions given to the person from whom that advice was obtained, the identity of that person or the reasoning process underlying that advice. 18It appears that, between October 2012 when he was retained by the Liquidator, until late March 2013, about the time correspondence was received from Angas' solicitors raising concerns as to the circumstances of his retainer by the Liquidator, Mr Hudson did not open a separate file to record time or store documents in respect of the retainer for the Liquidator. Mr Hudson stored electronic documents, in respect of the work he was undertaking for the Liquidator, in the file used for Mr Anderson's Family Court proceedings. Mr Hudson also did not prepare a separate costs agreement in respect of the engagement for the Liquidator until late March 2013, and recorded time spent in respect of the matter on the file retained for Mr Anderson until about the same time. Mr Hudson explains that matter by reference to the demands of being a sole practitioner with no support staff. 19Angas, MFM and Mr Hower contend that Mr Hudson's failure to operate a separate file is indicative of his belief that the work done for the Liquidator was related to the work he was undertaking for Mr Anderson in the Family Court proceedings. There seems to me to be substantial force in that submission. Even accepting Mr Hudson's evidence as to the time pressures upon a sole practitioner who did not have administrative assistance, it seems to me that he would have found the time necessary to open a separate file (which is, on his evidence, 30 to 40 minutes), as he later did in March 2013 when his retainer was challenged, had he initially perceived the separation of work he was undertaking for the Liquidator from work he was undertaking for Mr Anderson in the Family Court proceedings as a significant matter. 20Angas, MFM and Mr Hower also rely on the inclusion of paragraphs 40-45 in the orders for production to contend that the application was made in circumstances of a conflict of interest affecting the Liquidator and Mr Hudson. Those paragraphs relate to the sale of personal property owned or purported to be owned by the Atom Trust and "seized by" Angas or the Receivers. Mr Hudson's evidence in cross-examination was that those paragraphs were included in the orders for production at the suggestion of Mr Short, who is a friend of Mr Anderson and is assisting him in the conduct of the Family Court proceedings. Mr Hudson reviewed and settled the draft orders for production, which were not settled by Counsel. Mr Hudson acknowledged in cross-examination that paragraphs 40-45 of the orders for production were material to Mr Anderson's interests in the Family Court proceedings. Mr Hudson also acknowledged that it was contemplated, at the time the orders for production were issued, that questions would be asked of Mr Hower in the oral examination in connection with documents produced in response to those paragraphs, at a time that Mr Anderson had a continuing interest in the Family Court proceedings in establishing that the relevant assets were owned by the Atom Trust rather than by Owston. 21Mr Hudson's evidence was that he advised the Liquidator that it was in the Liquidator's interests to have documents produced in respect of those paragraphs because they relate to an issue involving Owston. Mr Hudson's best recollection was that he had also disclosed to the Liquidator that there was a dispute in the Family Court proceedings in respect of Angas' attempt to enforce the settlement and Mr Anderson's attempt to resist that matter, although he indicated that he could not state that matter with "any great certainty". In my view, Mr Hudson faced an acute conflict in advising the Liquidator as to whether the orders for production to be sought from the Court should include paragraphs which were sought by Mr Anderson (by his adviser, Mr Short) in those circumstances. Angas, MFM and Mr Hower submit, and there seems to me substantial force in the submission, that the extent of a potential conflict of interest between Mr Anderson's interests and the Liquidator's interests were not fully disclosed to the Liquidator so as to obtain the Liquidator's fully informed consent. That proposition seems at least to be established so far as the inclusion of these paragraphs in the orders for production. 22Angas, MFM and Mr Hower also submit that, if Hudson Law was to continue to act for the Liquidator in prosecuting the examination summonses, and to have access to the documents the subject of the orders for production, it is highly likely that information would be disclosed by Angas or Mr Hower to Hudson Law which would be of relevance to Mr Anderson in respect of his allegations against the Receivers in the Family Court proceedings. Angas, MFM and Mr Hower point out that the implied undertaking would be applicable in respect of such documents produced under an examination summons: Re Southern Equities Corporation Ltd (in liq); Bond & Caboche v England (1997) 25 ACSR 394. Angas, MFM and Mr Hower submit that: "There is a very real risk that, by Hudson Law acting for the liquidator, Mr Anderson will gain an advantage in the Family Court proceedings that is not otherwise available. ..." 23I do not accept that these matters would alone prevent the Liquidator's retainer of Hudson Law. It would not be uncommon that a solicitor may, in one proceedings obtain access to documents produced by a party subject to the implied undertaking and act against that party in other proceedings. A solicitor must, in those circumstances, comply with the implied undertaking, and there is no reason to assume that Mr Hudson will not do so or that Mr Anderson will, as Angas, MFM and Mr Hower assume, obtain access to those documents in a manner involving any breach of the implied undertaking. I also do not consider that the further suggestion by Angas that there is a conflict, so far as the examination may extend to potential claims by Owston against Mr Anderson was established, since there was nothing before me to identify the nature or likelihood of such claims or any real prospect that Mr Hower could give relevant evidence in respect of them. 24Angas, MFM and Mr Hower emphasise that a liquidator must both be, and appear to be, independent. It is well-established that a liquidator must be independent and must act impartially in the discharge of his or her duties and responsibilities: Re Allebart Pty Ltd (in liq) and the Companies Act [1971] 1 NSWLR 24 at 30; Re Club Superstores Australia Pty Ltd (in liq) (1993) 10 ACSR 730 at 734; Aboriginal and Torres Strait Island Commission v Jurnkurakurr Aboriginal Resource Centre Aboriginal Corporation (in liq) (1992) 10 ACSR 121; Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; (2003) 45 ACSR 612. Angas, MFM and Mr Hower contend that the same proposition applies to a solicitor acting for a liquidator. 25The Liquidator draws attention to the decision of Waddell CJ in Eq in Re Laurie Cottier Productions Pty Ltd (1992) 9 ACSR 513 at 518, where his Honour did not infer that a liquidator was acting only in the interests of another party because he used the same solicitors as that other party. On the other hand, Angas, MFM and Mr Hower refer to the decision in Southern Hotels Pty Ltd, Re Temple [2000] FCA 1406, where Southern Hotels contended that a solicitor acting for a bankruptcy trustee could not advise the trustee impartially about the admissibility of claims by its client and by Southern Hotels when its client and Southern Hotels were in contrary interests, and that there existed an actual or potential conflict of such a dimension that the solicitors could not be permitted to continue to act for the trustee. O'Loughlin J emphasised (at [14]) that the question was not one of actual conflict but of a perception of conflict and observed that: "It would not be wise to make a global statement that a trustee could never use the service of a solicitor who also acts for a large creditor; indeed there might be occasions when the services of such a solicitor might be beneficial to the estate. However, at any reasonable suggestion of conflict, it would be wise for the trustee to emphasise that mantle of independence and impartiality by ensuring that his legal adviser has had no prior or current relevant contact with any of the disputants ...". 26His Honour also referred to Re Pruzanski; ex parte Horne [2000] FCA 151 as authority for the proposition that a solicitor for a trustee in bankruptcy should not have the dual role of also being a solicitor for a major creditor in the bankruptcy if there is appropriate and reasonable opposition to that position from another major creditor, at least where there was a conflict of interest between the solicitor's duty to assist the creditor to defeat the claims of other creditors and the solicitor's duty to assist the trustee to determine impartially the validity of the claims of all creditors. In that case, the Court ordered that the solicitors be restrained from further acting on behalf of any trustee who may be appointed by the Court to administer the relevant bankruptcies. The Court was not required to reach a final decision in Southern Hotels, because the solicitors voluntarily withdrew from acting for the trustee, although his Honour indicated (at [27]) that the solicitor should not have acted for the trustees where there was history of antagonism between the respective parties and it was likely that the trustee would need to take legal advice in respect of the respective claims of those parties as creditors in the estate. 27Angus, MFM and Mr Hower also invoke the Court's inherent jurisdiction over solicitors as officers of the Court. In Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 at [76], Brereton J noted that: "The court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice ....The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice ... The jurisdiction is to be regarded as exceptional and is to be exercised with caution" The principles set out by Brereton J in Kallinicos v Hunt were in turn applied in by Cleveland Investments Global Ltd v Evans [2010] NSWSC 567 and in Ausmedic Australia Pty Ltd v Whiteley Medical Supplies Pty Ltd [2012] NSWSC 1270 at [135]. 28In Re Kala Capital Pty Ltd (in liq) [2012] NSWSC 1073, I observed that it was generally undesirable for a liquidator to engage solicitors who acted for a substantial creditor, but held that the circumstances in that case did not warrant an order setting aside the examination summonses or orders for production. That case is distinguishable at least so far as the liquidator had there retained an independent solicitor to advise in respect of issues giving rise to a potential conflict of interest, and that solicitor gave evidence which led me to conclude that he would properly perform that role. 29The history of the matter, and particularly the manner in which the Liquidator's file was opened and maintained and the inclusion of paragraphs 40-45 in the orders for production suggests that Hudson Law was initially not sufficiently alert to the need to distinguish Owston's and Liquidator's interests from those of Mr Anderson. However, that previous failure would not necessarily lead me to reach the view that the Liquidator could not retain Hudson Law in respect of future examinations and orders for production only on the basis of Hudson Law's involvement in the Family Court proceedings. It seems to me at least possible that there would be no basis to retain the Liquidator from retaining Hudson Law, or to restrain Hudson Law from acting, in respect of such orders and such an examination, if Hudson Law were to adopt appropriate measures to distinguish the interests of the Liquidator and Mr Anderson - including, for example, ensuring that it only communicates with the Liquidator and not with Mr Short or Mr Anderson in respect of the liquidation - and narrower orders for production were sought focussing only on the information for which the Liquidator has a proper need, and if proper disclosure of the relevant issues were made in the application before the Registrar for such orders. The Court might more readily form that view if the Liquidator takes the steps to obtain independent advice which were, for example, taken by the liquidator in Kala Capital, so as to ensure that there is independent oversight of Hudson Law's involvement with the examination, or if Counsel not acting for Mr Anderson were retained in respect of the examinations. 30I would more readily reach that view where the exclusion of Hudson Law would have the result that the Liquidator would be unable to obtain representation, if Mr Anderson will not or cannot fund him to do so, and if no other advisers are prepared to accept a retainer on the basis that Hudson Law were prepared to act. While I do not accept that a Liquidator who is unable to fund representation in a manner that is consistent with maintaining his independence can respond to that difficulty by accepting representation that is not consistent with maintaining that independence, the Court should in that situation more readily be prepared to accept reasonable steps that were taken by the Liquidator and Hudson Law to avoid the difficulties that have previously occurred. 31I should add that the decisions in Kallinicos v Hunt and Southern Hotels Pty Ltd, Re Temple, on which the Angas, MFM and MR Hower rely, were subsequently considered by the Supreme Court of South Australia in Re Westgate Wool Co Pty Limited (in liq) [2006] SASC 372; (2006) 60 ACSR 570, to which I was not referred in submissions. Debelle J there declined an application by an examinee to restrain solicitors for a liquidator from acting in respect of examinations, where they had previously represented another party in litigation against the company, but were no longer acting for that other party in those proceedings. His Honour distinguished the decision in Southern Hotels Pty Ltd, Re Temple on the basis of the long and bitter dispute between the creditors of the bankrupt estate which had existed in that case. His Honour also expressed the wider view that an examinee did not have standing to seek an injunction of the kind sought in the proceedings, observing at [54] that: ".. [the examinee] has no role other than as a witness. He has been summoned to give evidence and to produce documents. A witness has no standing to litigate the question whether it is proper for a firm of solicitors to be acting in the proceedings in which has been summoned to give evidence. There is, therefore, no ground upon which [the examinee] is entitled to seek to restrain [the solicitors] from acting for the liquidator." 32I would not understand that observation as necessarily preventing an examinee raising issues as to the conduct of a liquidator or his or her legal representatives, both of whom are officers of the Court, as warranting the Court's intervention in an appropriate case, as was done in Southern Hotels Pty Ltd, Re Temple above. However, that approach seems to me to suggest at least that the Court should not intervene, on the application of a third party, so as to require termination of a liquidator's engagement of legal representatives where a less intrusive course is available. 33In the present case, I do not consider that it is necessary or appropriate to express a view that the Liquidator cannot continue to retain Hudson Law for the purposes of a further application for orders for production and an examination summons, after taking appropriate steps to ensure that the issues to which I have referred are addressed, and making proper disclosure of those issues and the steps taken to address them in any affidavit in support of that application. It follows that injunctive relief in the form initially sought by Angas, MFM and Mr Hower should also not be granted. Application to set aside the examination summons addressed to Mr Hower and the orders for production addressed to Angas and MFM 34I now turn to the application for orders setting aside the orders for production addressed to Angas and MFM and the summons for examination addressed to Mr Hower. That application involves a review of the Registrar's determination to issue that summons and orders in accordance with the principles established by Uniform Civil Procedure Rules (2005) (NSW) r 49.19, Wily Re LED (South Coast) Pty Ltd [2009] NSWSC 946; (2009) 76 NSWLR 428 at 430, 434. 35Angas, MFM and Mr Hower contend that the Court should find that the examination summons was issued by the Liquidator for an improper purpose. They draw attention to the High Court's observation as to the public purposes served by the examination process in Hamilton v Oades (1989) 166 CLR 486 at 496, where Mason CJ observed that: "There are the two important public purposes that the examination is designed to serve. One is to enable the liquidator to gather information which will assist him in the winding up; that involves protecting the interests of creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connection with the company's affairs." 36In Evans v Wainter Pty Ltd (2005) 145 FCR 176, Lander J (with whom Ryan and Crennan JJ generally agreed) observed that legitimate purposes for an examination include: "3.1 First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation. 3.2 Secondly, it assists the corporation's administrators to identify the corporation's assets, both tangible and intangible. It also allows the corporation's liabilities to be identified. 3.3 Thirdly, the purpose is to protect the interests of the corporation's creditors. 3.4 Fourthly, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation. 3.5 Fifthly, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations." His Honour also noted that an application for an order for examination made for a purpose unconnected with the purposes authorised by the legislation would be an abuse of process and the order, if obtained, would be set aside; and that an abuse of process would not be established unless an offensive purpose is at least the predominant purpose. His Honour also noted that it will be an offensive purpose if the application could not be characterised as being for the benefit of the corporation, its contributories or creditors. 37Angas, MFM and Mr Hower submit that: "... The clear inference to be drawn from the Liquidator's retainer of Hudson Law in relation to the Examination Summons and the Orders for Production, in circumstances where Hudson Law is concurrently acting against the interests of Mr Hower, Angas and [Owston] in separate proceedings for the benefit of Mr Anderson and against the interests of [Owston], is that the Liquidator had an improper purpose in issuing the Examination Summons and Orders for Production. No explanation was otherwise offered by the Liquidator for his decision to use Hudson Law as his solicitors. ..." 38Angas, MFM and Mr Hower also rely on the absence of specific disclosure by the Liquidator of his purpose in seeking the documents relating to the Atom Trust in paragraphs 40-45 of the orders for production, a matter to which I have referred above. They also rely on the previous "delegation" of the Liquidator's investigative function to Mr Anderson which, not surprisingly, they contend was impermissible. 39Angas, MFM and Mr Hower also rely upon the fact that Mr Anderson had sought in the Family Court proceedings and been refused orders for disclosure of the same or similar documents to those now sought by the Liquidator. The relevant categories are not identical in terms and, indeed, the range of information sought by the Liquidator is substantially wider than that sought by Mr Anderson in the Family Court proceedings. The Liquidator submits, and I accept, that some similarity between the categories is inevitable where the information requests are directed to key financial information in respect of the dealings between Angas and Owston. Angas, MFM and Mr Hower also point out that Mr Anderson had also sought, in the Family Court proceedings, an order that an examination summons be issued although that application was ultimately not pressed. Angas notes that Mr Anderson had subsequently sought to have subpoenas issued to Angas' legal advisers in the Family Court, seeking production of further documentation, which was set aside by the Family Court. The documents sought by that subpoena relate primarily to the sale of certain properties and are significantly narrower than, although overlapping with, the documents sought by the Liquidator. 40I do not consider that I should draw the inference that the Liquidator had an improper purpose in conducting the examination generally. It is plain that the Liquidator has been seeking information as to the dealings between Owston and Angas and MFM for a considerable period, and Angas and MFM have not been forthcoming in providing that information. In these circumstances, it seems to me that the Liquidator's evidence, in his affidavit in support of the application for issue of the examination summons and orders for production, that the purpose of the examination is to obtain information as to those matters should be accepted. His decision to use Hudson Law is readily explicable where they, somewhat unusually, have been prepared to act for him without guarantee of payment. On Mr Hudson's evidence, that reflects Mr Hudson's interest in growing his practice, rather than any arrangement for payment by Mr Anderson, for whom Mr Hudson is conducting the proceedings on the same basis. 41Angas, MFM and Mr Hower point out that the Liquidator was appointed on 12 November 2010, but did not issue any examination summons until March 2013, several months before Mr Anderson's claims in the Family Court proceedings will be argued. There was a dispute before me as to whether those matters were in fact listed for argument on 13 June 2013 in the Family Court, which it is not possible for me to resolve on the evidence before me. I also do not consider that these matters support the inference which Angas, MFM and Mr Hower seek to draw. The Liquidator's activity in respect of this issue, at this time, is readily explicable by the fact that he has now obtained Mr Hudson's assistance in the proceedings, without being required to pay for it, in circumstances that he was without funds in the liquidation to pay for other representation. 42Angas, MFM and Mr Hower rely on the inclusion of paragraphs 40-45 in the orders for production (which, as I noted above, relate to the sale of personal property owned or purported to be owned by the Atom Trust) to contend that the application for the orders for production was an abuse of process when made, and that matter cannot be cured by later withdrawing those paragraphs, as the Liquidator has now done without any admission that they were improper. The Liquidator contends that any allegation by Angas that assets are owned by Owston relates to Owston's examinable affairs and that he is entitled to investigate the ownership of those assets for the benefit of Owston's creditors, and he contends that paragraphs 40-45 of the orders for production were justifiable on that basis. 43It is apparent that access to the documents sought by paragraphs 40-45 of the orders for production would advance Mr Anderson's interests in the Family Court proceedings, so far as he seeks to establish that the Atom Trust is the true owner of items which were sold by the Receivers on the basis that they were Owston's property. It is more difficult to see why access to those documents would advance Owston's interests or the interests of its creditors, so far as they may advance Mr Anderson's contrary interests. The Liquidator did not lead evidence as to his own reasoning as to that matter. The Liquidator's Counsel submits that Owston's interests would be advanced by knowing what is in the documents, irrespective of their content. However, the proposition that the Liquidator needed information as to the matters relating to the Atom Trust highlights the question what the Liquidator would do with such information when received. The sale of the assets by the Atom Trust had been undertaken by the Receivers; that sale was already being challenged by Mr Anderson in the Family Court proceedings; and the Liquidator then had no funds to pursue an application to set it aside, even if any useful purpose had been served by doing so. 44I have referred above to the circumstances in which paragraphs 40-45 were included in the draft orders for production by Mr Short. The fact that Mr Short, and not the Liquidator, proposed inclusion of these paragraphs in the orders for production strongly supports an inference that they were included to advance Mr Anderson's interests rather than the interests of the liquidation, particularly where Mr Short had no role in the liquidation and his only relevant role was in assisting Mr Anderson in respect of the conduct of the Family Court proceedings. It appears that the Liquidator was aware that Mr Short was involved with preparation of the orders for production, although not necessarily with the insertion of paragraphs 40-45 in them, because Mr Hudson's evidence was that the Liquidator had been copied on emails where Mr Short had amended or done work on the orders for production. It seems to me that the inclusion of paragraphs 40-45 in the orders for production and the proposed examination of Mr Hower as to that issue involved, objectively, an improper purpose. 45However, I do not conclude that that was a predominant purpose in the application for the orders for production or the examination summons so as to warrant an order that they now be set aside, particularly where those paragraphs of the orders for production are not pressed and on the basis that the examination will not address the issue that is in dispute in the Family Court proceedings. It seems to me that there is a proper purpose in the Liquidator's seeking the information that Angas and MFM have failed to provide over an extended period, so as to assist in the proper performance of his duties, and that seems to me to be the predominant purpose of the orders for production and examinations. Allegation of material non-disclosure by the Liquidator 46Angas, MFM and Mr Hower point to the Liquidator's obligations of disclosure in an application for the issue of an examination summons made on an ex parte basis. An affidavit in support of the application for an examination summons should disclose all matters which may impact upon exercise of the court's discretion whether to order the examination, and, as I will note below, an examination summons may be set aside if material matters are not disclosed. 47There were, however, several relevant matters to which the Liquidator's affidavit did not draw attention. That affidavit did not sufficiently draw attention to the fact that the Liquidator was represented in respect of the application for the examination summons and would be represented in respect of the examinations by the solicitors (and, it appears, the Counsel) acting for Mr Anderson in the Family Court proceedings. The Liquidator contends that correspondence by Mr Anderson's previous solicitors to the Defendants, which was annexed to his affidavit in support of the issue for the Examination Summonses, referred to the Family Court proceedings. I do not consider that a reference to that matter, in an annexure to the affidavit, sufficiently drew the Registrar's attention to the relevant issues. I consider that these matters were relevant to the Registrar's decision whether to issue the orders for production and examination summons and should have been expressly addressed in the affidavit. 48As Angas points out, the Liquidator's affidavit also did not disclose why documents relating to the Atom Trust were sought in paragraphs 40-45 of the orders for production; the nature of the allegations made by Mr Anderson in the Family Court proceedings in relation to the Atom Trust; or the overlap between the claims made by Mr Anderson in the Family Court proceedings regarding the Atom Trust and the documents sought by the order for production, or the issue as to whether Mr Anderson might gain a forensic advantage in the Family Court proceedings by reason of the examinations summonses and order for production. Angas, MFM and Mr Hower also contend that the affidavit should have been disclosed that Hudson Law had an actual and not merely theoretical conflict, at least in respect of the issue in respect of the Atom Trust, and draw attention to Mr Hudson's evidence that he had advised the Liquidator that there was a divergence of position between Mr Anderson and Owston's interests concerning the Atom Trust. I consider that these matters were also relevant to the Registrar's decision whether to issue the orders for production and examination summons and should have been expressly addressed in the affidavit. 49Angas, MFM and Mr Hower also submit that it cannot be inferred that the non-disclosure of the role of Hudson Law as solicitors for Mr Anderson or the nature of the conflict of interest facing those solicitors was inadvertent, in circumstances that Mr Hudson's evidence is that he had discussed the different interests of the Liquidator and Mr Anderson in respect of access to documents with the Liquidator. It is not necessary to find that there was any deliberate concealment of the relevant matters from the Court, but I also cannot find the disclosure was inadvertent in the sense that those matters had not been recognised by the Liquidator or Mr Hudson. 50The Liquidator's affidavit also did not disclose a matter that emerged (as I noted above) from the cross-examination of Mr Hudson, that the orders for production had been drafted with significant input from Mr Short assisting Mr Anderson in the conduct of the relevant dispute. In my view, this was a significant non-disclosure. In my view, a Registrar would undoubtedly have had cause to pause in issuing the examination summons and orders for production had that matter been drawn to his or her attention. 51An order for examination may be set aside if the application for an examination summons did not make full and frank disclosure of any matters which may impact on the decision to issue that summons, including anything that might lead the Court to refuse the application: Re Southern Equities Corporation Ltd (in liq); Bond v England above; Re Mendarma Pty Ltd (in liq) [2006] NSWSC 1306 at [45]; Re Shepard (in his capacity as administrator of Hunter Bulk Materials Pty Ltd) (subject to deed of company arrangement) [2011] NSWSC 467; (2011) 83 ACSR 436 at [49]. The setting aside of an examination summons is discretionary, as Lander J noted in Re Southern Equities Corporation at [47], observing that: "It cannot be said that an order obtained in circumstances where there has been a failure to disclose material facts must necessarily be set aside. Whether or not the order ought to be set aside for failing to disclose material facts will depend on the facts not disclosed and the circumstances in which the non disclosure came about. ...an innocent non disclosure may not necessarily require the setting aside of the order for the examination. On every occasion where there has been a non disclosure and an order obtained it will be a matter of inquiry as to whether or not that non disclosure should lead to the setting aside of the order." 52In Re Mendarma Pty Ltd (in liq) above, White J noted that it did not follow from non-disclosures of matters material to the Registrar's decision to summons the applicants for examination that the summonses should necessarily be set aside. However, his Honour also noted that the Court regards a breach of the obligation to make full disclosure seriously and that he was not in a position to decide whether, had those matters been disclosed, the decision would have been the same. His Honour there set aside summonses for examination by reason of such a non-disclosure, noting that the discharge of those Summonses was not a bar to the Liquidators applying afresh on an affidavit which made full disclosure of all material matters. 53The Liquidator relied, as a matter tending against setting aside the examination summons, on the possibility of a claim under the voidable transaction provisions in s 588E of the Corporations Act, and referred to the time limits applicable to such a claim and the risk that the loss of legal representation or the examination dates may make it impossible for him to meet those time limits. However, the Liquidator made no reference to such a claim in his affidavit and it is difficult to see how he could fund the pursuit of such a claim if he presently without funds, and indeed deploys that proposition in support of the contention that he is unable to retain solicitors other than Hudson Law. While that is a matter which should be taken into account, it does not seem to me that it should lead to the result that the Court would permit examinations or orders for production which were obtained on the basis of material non-disclosures to go forward. It is, of course, open to the Liquidator to apply for an extension of time in respect of the commencement of proceedings, if he considers he has a proper basis for such an application. 54In my view, the non-disclosures of the matters to which I referred above were material non-disclosures and require that the orders for production and examination summons be set aside. It remains open to the Liquidator to bring a further application for the issue of such orders for production and examination summons, supported by an affidavit that makes adequate disclosure of the relevant matters. Orders and costs 55 I therefore order that: 1 The Summons for Examination dated 6 March 2013 addressed to Matthew John Hower be set aside. 2 The Orders for Production dated 6 March 2013 addressed to the proper officers of Angas Securities Limited and Mortgage Funds Management Limited respectively be set aside. 56I will hear the parties as to costs.

(2005) 64 NSWLR 561

Ausmedic Australia Pty Ltd v Whiteley Medical Supplies Pty Ltd

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