Ball v Jeremy Joseph Nipps as liquidator of Ochre Group Holdings Ltd

JACKSON J: 1 Ochre Group Holdings Limited is in liquidation. On 1 March 2023 Registrar Trott made orders under s 596A and s 596B of the Corporations Act 2011 (Cth) for the issue of summonses for the compulsory examination of a number of people, including present and former directors of the company. 2 In the case of two of those people, Made Sumarya and Nathan John Featherby, it was not practicable for the liquidator to arrange personal service of the summonses, because they had left Australia. It appears that Mr Sumarya, who is still a director of Ochre Group Holdings, has relocated to Indonesia. It appears that Mr Featherby has relocated to South America, possibly Argentina. 3 On 22 June 2023 and 26 June 2023 I made orders for leave to serve the examination summonses overseas and for substituted service on Mr Sumarya and Mr Featherby respectively. The summonses had been initially returnable before those dates, but by reason of orders made by registrars and by me from time to time, the return dates have since been amended to 17 July 2023, then to 25 July 2023, then to 11 September 2023, then to 23 October 2023, then to 6 November 2023. Neither Mr Sumarya nor Mr Featherby has appeared before the Court on any of those occasions. The return date was most recently extended to the day of the hearing of this application, by which the liquidator sought the issue of warrants for their arrest. 4 At that hearing, I made orders for the issue of arrest warrants as sought, and for deemed service of Mr Featherby. These are my reasons for those orders.

Principles 5 The orders for the issue of warrants were sought under r 11.10 of the Federal Court (Corporations Rules) 2000 (Cth). That rule is in Division 11, which makes provision in relation to the issue, conduct and discharge of summonses including those under s 596A and s 596B of the Corporations Act. Rule 11.10 provides: (1) This rule applies if a person is summoned or ordered by the Court to attend for examination, and: (a) without reasonable cause, the person: (i) fails to attend at the time and place appointed; or (ii) fails to attend from day to day until the conclusion of the examination; or (iii) refuses or fails to take an oath or make an affirmation; or (iv) refuses or fails to answer a question that the Court directs the person to answer; or (v) refuses or fails to produce books that the summons requires the person to produce; or (vi) fails to comply with a requirement by the Court to sign a written record of the examination; or (b) before the day fixed for the examination, the person who applied for the summons or order satisfies the Court that there is reason to believe that the person summoned or ordered to attend for examination has absconded or is about to abscond. (2) The Court may: (a) issue a warrant for the arrest of the person summoned or ordered to attend for examination; and (b) make any other orders that the Court thinks just or necessary. 6 As to any requirement of proof that the person knew about the summons, in Re Struthers [2005] NSWSC 864 at [40], Brereton J proceeded on the basis that it is implicit in the requirement that a person is 'summoned by the Court to attend for examination' that the summons 'be conveyed to or served on the examinee'. In Mensink v Parbery [2018] FCAFC 101; (2018) 264 FCR 265 at [171], Bromwich J (Besanko and Wigney JJ agreeing) seemed to consider that the question was whether the person knew of the obligation to attend court on the particular occasion. At [176] and [180] his Honour also seemed to consider that constructive notice may be sufficient. 7 I thus proceeded on the basis that it was necessary for the liquidator to establish that the summons, and the need to attend on a specific occasion as ordered by the Court, was brought to the attention of the person who was sought to be the object of the warrant. That is not necessarily the same thing as personal service, although obviously personal service of a summons or order will be enough to establish it. Nor is it the same thing as substituted service, although the requirement, before substituted service is ordered, that there is a high probability that the manner of service will bring the summons or order to the person's attention, may go a long way to establishing it. 8 As to the requirement in r 11.10(1)(a)(i) and (ii) that the person has failed to attend 'without reasonable cause', courts have generally proceeded on the basis that there is an onus of negativing reasonable cause on the applicant for the warrant, although, since knowledge of the cause is almost exclusively in the possession of the prospective examinee, only slight evidence is needed to discharge that onus: Re Struthers at [44]; Mensink v Parbery at [58], [153], [156]. 9 Certainly, courts taking that approach have been prepared to conclude on slight evidence that the prospective examinee does not have reasonable cause for failing to attend. For example, evidence that the person has been talking to other people recently may support an inference that the person is alive, well and, in practical terms, available to give evidence: see Re Actwane Pty Limited (In Liquidation) (Receiver & Manager Appointed) [2002] NSWSC 512 at [9] (Campbell J, reasons re issue of warrant). In Pascoe; Re GMP Electrical and Technical Services Limited (in liq) [2010] FCA 999 at [4], Stone J held that in circumstances where an examinee had not responded to the service of the summons in any way, it appeared that he had no reasonable cause for his failure to comply. That was in a context where the person had refused to comply with numerous directions and requests from the liquidator's office. 10 As will be seen below, in relation to Mr Sumarya there was essentially no evidence as to whether he had a reasonable cause not to attend. I considered that required me to determine whether r 11.10 does indeed impose an onus on the liquidator to negative reasonable cause. 11 The apparent source of the approach that the onus of disproving reasonable cause is on the liquidator is Re Struthers at [44]. But there, Brereton J did not decide where the onus lay; his Honour was simply content to proceed on the basis that it lay on the liquidator. His Honour gave no reasoning for taking that approach, and did not cite any previous authority. In Mensink v Parbery, while the Full Court was content to proceed in the same way, at [172] it left the question open. 12 Whether the rule does place the onus of establishing reasonable cause on the prospective examinee or on the liquidator is a question of statutory interpretation. It is convenient to repeat the relevant principles as collected in Frigger v Trenfield (No 10) [2021] FCA 1500 at [511]: It must be determined as a matter of substance: Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88 at 119 (McHugh J). The question is whether the matter in question is part of the total statement of the obligation, or whether it is in the nature of an excuse or justification: Avel at 119; Vines v Djordjevitch (1955) 91 CLR 512 at 519-520. If the purpose of the legislation is to lay down a principle of liability which is intended to apply generally, and then to provide for some special grounds of excuse, justification or exculpation depending upon new or additional facts, the onus of proving those facts will lie on the party seeking to rely on them: Vines at 519-120. If the form or structure of the legislation does not give definite guidance on the question of burden of proof, it may be significant that the matter is peculiarly within the knowledge of one party or easier for that party to prove: Waters v Mercedes Holdings Pty Ltd [2012] FCAFC 80; (2012) 203 FCR 218 at [19]. 13 It is also relevant that as a general, although not uniform rule, the proof of a negative is not imposed on a party: Darling Island Stevedoring & Lighterage Co Ltd v Jacobsen (1945) 70 CLR 635 at 644 (Dixon J). 14 Applying these principles to r 11.10 of the Corporations Rules indicates that the onus of establishing that there is reasonable cause lies on the prospective examinee, not the other way around. The nature of the obligation for the enforcement of which the rule provides is clear enough; it is to obey the summons. If there is a reasonable cause for not obeying the summons, that is in the nature of an excuse or justification; it is not part of the total statement of the obligation. If there is a reasonable cause, it will appear from new or additional facts, and those facts are likely to be uniquely within the knowledge of the examinee and, in the circumstances for which the rule provides, difficult or impossible for the applicant for the warrant to prove. It is unlikely that the benefit of the rule is intended to be confined to cases, like Re Struthers and like Mensink v Parbery, where the examinee makes some contact with the liquidator about the warrant, whether directly or through solicitors, so that inferences about the cause of his or her non-attendance are more readily reached. 15 In R v DA [2016] VSCA 325, the Court of Appeal of Victoria held that in a prosecution for contempt of the Chief Examiner under s 49(1)(b) of the Major Crime (Investigative Powers) Act 2004 (Vic) for refusing or failing to answer a question, the onus of proving that a person had no reasonable excuse for that refusal or failure fell on the prosecutor, although the accused still had an evidentiary onus to discharge: at [47]. The Court of Appeal was influenced in that regard by the fact that in s 49(1)(b), the exception was placed within the statement of the rule: at [47]. But R v DA is a different case, in the criminal jurisdiction, where the presumption of innocence and the usual obligation of the prosecution to prove all elements of the offence beyond reasonable doubt loomed large. The decision of the High Court in Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249, on which the Court of Appeal relied concerning the significance of the drafting structure of the provision shows that the true characterisation of the element, exception or excuse is a matter of substance, not of form: at 257-259. In any event, as a matter of form, the obligation in this case - to comply with the summons and orders of the Court - appear elsewhere, namely in the summonses and orders themselves. I do not consider that the particular form or structure of r 11.10 bears on the issue to any great degree. The considerations of substance all point to the onus being on the prospective examinee. 16 It is true that applications for the issue of warrants may be made ex parte: Re Struthers at [47]; Re Biotech Energy Pty Ltd (Receivers and Managers appointed) [2023] FCA 653 at [33] (Halley J). Obviously, if that occurs the examinee will have no opportunity to discharge the onus. But there is nothing inherent in the rule that requires the application to be made ex parte, and often it is not; Re Struthers and Mensink v Parbery are examples of applications that were opposed. Mr Sumarya and Mr Featherby were given notice of the present application in the ways that are described below. 17 That is in contrast to r 11.10(1)(b) (reproduced above) which is directed in part to people who are about to abscond. Those applications may well be brought ex parte, but the concept of reasonable excuse does not qualify r 11.10(1)(b). And if an application under r 11.10(1)(a) is brought ex parte, there will be an obligation to bring any material matter within the applicant's knowledge to the Court's attention. If a person who has been served with a summons truly does have a reasonable cause not to attend, the proper course to take will be to bring it to the Court's attention before the return date, ideally in the course of applying for an extension of time. 18 I note that in Mensink v Parbery at [44], Wigney J said, contrary to Brereton J in Re Struthers, that the requirement of proving that that the summons or order was brought to the attention of the prospective examinee is not necessarily implicit in the concept of a person being 'summoned or ordered by the Court to attend for examination', and that the better view is that it is relevant to the element relating to reasonable cause. If that is correct, it would suggest that the onus of proving reasonable cause cannot be on the examinee, since it would be absurd to expect them to disprove that they were aware of the summons at all. But Wigney J was speaking obiter and the other two members of the Full Court made no comment on the point. Respectfully, I consider that even if the requirement that the person knew of the summons is not implicit in the concept that they have been summoned or ordered to attend, it is implicit in another word used in r 11.10, namely that they have 'failed' to attend. I therefore do not consider that placing the onus of proving reasonable cause on the prospective examinee is inconsistent with placing the onus of proving knowledge of the summons or order on the applicant for the warrant. 19 If the conditions for the issue of a warrant are met, a discretion as to whether to issue it remains. Relevant considerations include (Re Struthers at [45]): (1) the prima facie entitlement of a person who has procured the issue of a subpoena or examinations summons which has not been set aside to have it complied with and, if not, enforced; (2) the importance of securing compliance with orders of the Court intended to enable relevant evidence or information to be obtained in the interests of justice; (3) the reasonableness of steps already taken to obtain the co-operative attendance of the examinee or witness and the possibility of securing attendance by less extreme means; and (4) whether the burden imposed by the subpoena or summons is prima facie oppressive. 20 Usually the first two of these will weigh in favour of issuing a warrant: Re Struthers at [46]. The starting point is the recognition that a failure to obey court orders undermines the integrity of judicial proceedings: Polis v Zombor (No 4) [2019] FCA 2101 at [26] (O'Bryan J), and see Re Biotech Energy at [47]. One factor in favour of the exercise of the discretion is the fundamental importance of the examination regime in Part 5.9 of the Corporations Act in allowing external controllers to obtain information about the company to which they have been appointed: see Re Biotech Energy at [45].

The issue of a warrant for the arrest of Mr Sumarya 21 The liquidator relied on the following affidavits in support of the application: (a) two affidavits of James Alexander Raymond sworn 25 May 2023; (b) affidavit of Mr Raymond sworn 21 June 2023; and (c) affidavit of Mr Raymond sworn 7 November 2023. 22 In relation to Mr Sumarya, the evidence and the record of the Court's proceedings established the following: (1) Mr Sumarya is 54 years old. He was born in Denpasar, Indonesia. (2) Mr Sumarya attended Ochre Group Holdings board meetings conducted in English, and received emails in English, from which it can be inferred that he understands English. (3) On 23 February 2023, Mr Sumarya signed a proof of debt in the liquidation of Ochre Group Holdings which gave an address for him in Denpasar and an email address. (4) A Western Australian law firm, Kennedy Vinciullo, acted for Mr Sumarya in proceedings in the Supreme Court of Western Australia, instituted in March 2023, in which he sought to appeal the decision of the liquidator to reject that proof of debt. Kennedy Vinciullo ceased to act for Mr Sumarya in those proceedings on 26 July 2023: Ball v Jeremy Joseph Nipps as liquidator of Ochre Group Holdings Ltd (in Liquidation) [2023] WASC 348 at [21]. Kennedy Vinciullo have not at any point indicated that they have instructions to act for him in relation to the examination summons. They have said that they were unable to contact him to obtain instructions from him in respect of service. (5) The order for substituted service of the examination summons made on 22 June 2023 provided that the summons could be served on Mr Sumarya at the email address given on the proof of debt. It was so served on 23 June 2023, along with notice of an order fixing the return date of the summons at 17 July 2023. The summons and the orders were also sent to the email address of Mr Sumarya's then lawyer in the Supreme Court proceedings at Kennedy Vinciullo. (6) On 16 October 2023 the liquidator's solicitors, Mills Oakley, sent an email to Mr Sumarya telling him that the summons had been listed for mention on 23 October 2023 and that his attendance in person or by electronic link was required. On 24 October 2023 a further notice that the summons had been listed for mention on 6 November 2023 was sent to Mr Sumarya, repeating that his attendance in person or by electronic link was required. A similar notice of the hearing of the application for arrest warrants on 13 November 2023 was given by email on 6 November 2023. This said that the summons was returnable on 13 November too. (7) No bounce back or other notice of non-delivery has been received, and according to the records of Mills Oakley's IT department, the emails have been received. (8) Mr Sumarya has had no communications with the liquidator about the summons, either directly or through solicitors. (9) Mr Sumarya has not attended court on any of the occasions on which the summons was returnable, including the hearing of the application for the issue of the arrest warrant. 23 I was satisfied on the balance of probabilities that Mr Sumarya knew about the issue of the summons, and his obligation to attend, and that he knew about all but one of the dates on which the summons was returnable (by an oversight he was not given notice of the return date of 25 July 2023). The days have passed when email was an unreliable medium of communication. If Mr Sumarya placed an email address on his proof of debt as the way of contacting him on a matter that can be expected to be important to him, it is probable that the email account is active and regularly checked by him. 24 Mills Oakley have sent Mr Sumarya numerous emails about the matter. The emails were clearly expressed and Mr Sumarya's command of English is likely to be sufficient to comprehend them. That he knew about the summons was made more likely by the fact that, initially (on 23 June 2023 and 27 June 2023), Mills Oakley attempted to communicate through his Australian lawyers who were acting for him in proceedings in the Supreme Court of Western Australia at that time, and who could be expected to have brought the matter to his attention. 25 I was also satisfied that Mr Sumarya had not attended on any of the dates on which the summons was returnable. 26 As to reasonable excuse, the liquidator did not submit that the onus of establishing it was on Mr Sumarya. The liquidator's submission was, rather, that it was not necessary to decide because even if the onus of disproving it lay on the liquidator, it had been discharged. That was said to be so bearing in mind the slight evidence that would be capable of disproving reasonable cause, in accordance with Re Struthers. The evidence here was said to be the numerous communications with Mr Sumarya about the summons, and the lack of any attempt on his part to state a reasonable cause to the liquidators. That was especially in light of the fact that Mr Sumarya was, at least when service was effected, legally represented in other proceedings concerning Ochre Group, and so could be expected to have communicated through his solicitors. 27 This came down to a submission that where Mr Sumarya was told on several different occasions that he was required to attend at Court, it was more likely than not that if he had a reasonable excuse, he would have raised it with the liquidator or the Court by now. I was not prepared to make that inference. Only one such communication was received by Mr Sumarya by the time Kennedy Vincuillo ceased to act for him, so little can be made of the fact that they acted for him. It appears that they could not get instructions during that short period. 28 That matter aside, all the Court knows is that a person who appears to be a national of Indonesia, and who appears to live in Indonesia, has not replied to any communication with him about the summons. Even though I found that Mr Sumarya understands English enough to appreciate that he had been summonsed to appear in Court, and the subsequent orders made, it does not follow that he has sufficient familiarity with the Australian legal system to know the full extent of what that means, or that the obligation applies to him when he lives in a foreign country, or how he might go about giving any reasonable cause for non-attendance that he might have. In my respectful view, to find on the basis of such scant evidence that the liquidator has established on the balance of probabilities that Mr Sumarya had no reasonable cause not to attend would be to adopt a legal fiction, or at least a presumption that is not to be found in the wording of the rule. 29 That is why the better approach, for the reasons I have given, is that the onus of proving a reasonable cause not to attend is on Mr Sumarya. No such cause has been identified or is apparent. Without suggesting that it will be oppressive for Mr Sumarya to attend in person, it is notable that Mills Oakley gave him the opportunity of attending by electronic link, but he has taken no steps to avail himself of that option. 30 I was therefore satisfied of the preconditions to the exercise of the discretion under r 11.10(2) in relation to Mr Sumarya. 31 I was also satisfied that it was appropriate to exercise the discretion so as to order the issue of the arrest warrant. The public examination procedure is an important means by which liquidators of Australian companies may conduct necessary investigations and obtain information that they may not otherwise obtain which can, ultimately, help to achieve a better return to creditors. Ochre Group Holdings was a public company, and the liquidators are investigating transactions that, nominally at least, were for consideration valued in the millions of dollars. It is important that the directors or former directors of the company cooperate with the liquidator's examination, and also important that they obey orders of the Court. 32 For those reasons, a warrant for the arrest of Mr Sumarya under r 11.10 of the Corporations Rules was issued.

Deemed service on Mr Featherby and the issue of a warrant for his arrest 33 In relation to Mr Featherby, the evidence and the record of the Court's proceedings establish the following: (1) Mr Featherby is 43 years old. He was born in Australia. (2) Mr Featherby was a director of Ochre Group Holdings until 12 June 2019 and for at least some of that time was its Chairman. The liquidator alleges that he remained heavily involved in the company's affairs after that date. (3) Since before the commencement of this proceeding, Mr Featherby has lived in South America, most likely Argentina but possibly instead, or at some time also, in Uruguay. (4) The Court ordered substituted service of the examination summons on Mr Featherby by email and by text message to an Argentinian mobile telephone number. (5) It appears from attempts to serve Mr Featherby by the email address that it is no longer functioning. However other examinees have given evidence that they have contacted him on the mobile number as recently as July of this year. One of the examinees, Saxon Ball, travelled to Buenos Aires in July and met Mr Featherby there. (6) Also this year, another examinee, Michael Povey, had conversations with Mr Featherby about the public examinations. Mr Featherby was critical of the actions of the liquidator's firm, Cor Cordis. Mr Povey could not recall Mr Featherby saying that he, Mr Featherby, had been summonsed, but Mr Featherby knew that other Ochre Group Holdings directors and other persons had been summonsed. Since the summonses were ordered to be issued at the beginning of March, and Mr Povey was examined at the end of July, the conversation with Mr Featherby must have taken place between those two times. (7) A person who was examined on behalf of the liquidator in a private examination, Riaan Esterhuizen, indicated that Mr Featherby had an alternative email address. Emails sent to that address have been met with an automatic reply which says, 'Unavailable July 31 - December 15, apologies for any inconvenience. Please use alternative email'. This indicates that the account is functional and that the emails have got through. It is not clear from this ambiguous message whether the account is being monitored or why, if Mr Featherby is somehow 'unavailable', he cannot check this account, but can check another email address which, oddly, is not provided in the automated message. (8) Mr Featherby was served with the examination summons in accordance with the orders for substituted service on 26 June 2023 and informed of the return date of 17 July 2023. It would appear that the email by which that was done did not get through, because it was sent to the email address that is defunct. But a text message to the Argentinian telephone number informed him of other ways that he could get the summons, and told him of its importance. The sender has not received any bounce back or other notice or alert indicating that the text message was not received. (9) Mr Featherby was informed of the amended return dates for the summons, that is 23 October 2023, 6 November 2023 and 13 November 2023, by emails to the alternative email address and by text message to the Argentinian telephone number. For each occasion he was given the opportunity to attend by electronic link. As with Mr Sumarya, by an oversight he was not given notice of the return date of 25 July 2023. (10) The liquidators have received no communications about the examination summons from Mr Featherby, either directly or through lawyers. He has not sought to make any arrangements to appear at Court by electronic link and has not attended any of the return dates in person. 34 I was comfortably satisfied that Mr Featherby was aware of the examination summons issued to him and was satisfied that he had received notice of all but one of its various return dates. He has discussed the subject of examination summonses with, at least, Mr Povey and it is inconceivable that he did not appreciate that he too had been summonsed, given his status as a former Chairman of the company and the nature of his involvement with it. The Argentinian telephone number has been in active use by him and it is likely that he saw the text messages sent to it. The fact that the alternative email address is functional increases the probability that Mr Featherby was aware of when he was required to attend. 35 On that basis, it was appropriate to order that service by means of text messages to the Argentinian telephone number, and email to the functioning alternative email address, was deemed to have been service of the examination summons. Under r 10.23 of the Federal Court Rules 2011 (Cth), deemed service may be ordered if (a) it is not practicable to serve a document on the person in a way required by the rules and (b) the applicant provides evidence that the document has been brought to the attention of the person to be served. The matters relied on to support the orders for substituted service established the first of these criteria and the evidence summarised above established the second criterion. 36 Returning to the question of an arrest warrant, even if I am wrong about the onus of proving reasonable cause, I would have been satisfied that the liquidator had established (to the undemanding standard mentioned in Re Struthers) that Mr Featherby did not have reasonable cause not to attend in response to the summons. He appeared to have been well enough to travel to a place in Buenos Aires to meet Mr Ball in July of this year and so it could be inferred he could also have attended upon the return of the summons in the same month, whether in person or by electronic link. Mr Ball's evidence made no mention of any incapacity. But since my view is that the onus is on Mr Featherby, I did not need to rely on those matters. There has been no suggestion of any reasonable cause for Mr Featherby not to attend. 37 For the same reasons as stated in relation to Mr Sumarya, it was appropriate to exercise the discretion in favour of the issue of an arrest warrant. An order to that effect was made. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.