Bufalo Corporation Pty Ltd [2002] VSC 107 (11 April 2002)

Bufalo Corporation Pty Ltd [2002] VSC 107 (11 April 2002) - VSC 2002 case summary — Zoe

[73]

It is pointed out, and it is the fact, that the examinees are not and never were officers of the company. Rather, they are or were officers of Primelife. It is submitted that their examination, in the context of the pending litigation, is a fishing expedition, "a trial run for the litigation", and that Primelife and Sent should not be seriously disadvantaged by reason of the appointment of a liquidator to the company. That part of the submission is readily understood but a confusion was introduced by a further contention that, as a result of the company going into liquidation, the liquidator could not have a greater right than the company would have had. This contention was misconceived. The contention fundamentally misapprehended the role and position of the liquidator, as distinct from the company. The liquidator is appointed with certain powers and duties. He must, as soon as practicable, come to an understanding of the company's assets and liabilities, including any relevant claims concerning them, and take such action as may be appropriate in relation to them. In respect of the pending litigation, he is under pressure, including the constraint of an order of the Court, to act quickly in forming a view as to whether to continue the company's claim in the litigation. Time is not on his side. He is being forced to make a decision quickly. When, in that regard, he deemed it appropriate, on legal advice, to have the advantage of the public examination process he acted as an independent person under his appointment pursuant to the specially conferred legislative provision for public examinations. These provisions give to a liquidator "rights not possessed by an ordinary litigant".[11] They enable him to "obtain information for the proper winding up of the company or its affairs". [12] As Cohen J further said in Re Spedley, "There is no particular significance in whether proceedings are not yet contemplated, are about to be commenced or have already commenced as long as there is a legitimate basis for obtaining information".[13]

[84]

Then it was submitted that the public examination process is being used to assist the Bufalos' interests rather than the interests of the company. That this was the case would be discovered, it was claimed, on a perusal of the liquidator's documents as to the source of his funding. The argument seemed to be that if the funder was the Bufalo family or their close friends, allies or acquaintances, the point would be established. This was coupled with a submission that the liquidator was bound to disclose to the Court, on seeking the order for the examination summonses, the identity of any funder, as that was a matter which might have led the Court to refuse the application. In my view there is a lack of logic in this submission. In the first instance, it is for the liquidator and his legal representatives to consider what should be advised to the Court on the application for examination summonses, and, having done so, to fully and frankly inform the Court of any relevant matter. Speaking generally, I do not consider it a requirement in every case that the Court be informed of the existence of a funding arrangement. In some circumstances it may be appropriate to do so. But it could not be said to be an invariable requirement. After all, there is no inherent vice in a funding arrangement. Such an arrangement can permit a good claim to be brought to trial which could not otherwise be prosecuted. Further, the existence of funding by a person such as a creditor, who may benefit from successful litigation, does not constitute an improper purpose in relation to an order for an examination summons[21]. Even if it were correct that the Buffalos, their family, friends, allies or acquaintances, were providing funding to the liquidator, and that the funder's purpose was to advance the interests of the Bufalos, it does not follow that in seeking to conduct the public examinations the liquidator is acting solely (or predominantly) in their interests and not in the interest of other creditors or not in the interest of being informed of relevant matters concerning the examinable affairs of the company, including the litigation, and in that regard assisting in determining whether to continue with the litigation in its present or an amended form.

[92]

I reject the submission that the liquidator's claimed purpose was not his true purpose. I also reject as totally unsubstantiated the submission that in expressing his purpose the liquidator was influenced - meaning, I think, to act unfairly - by persons ultimately funding the liquidation. In any event, there is a serious question of whether an order for examination summonses can be set aside on a ground of unfairness. Counsel relied on the decision of the Full Court of the Supreme Court of Western Australia in Douglas-Brown (The official liquidator of Woomera Holdings Pty Ltd) (rec and mgr aptd) v Furzer,[22] where Malcolm CJ stated, in a judgment with which Ipp and Anderson JJ agreed, that an order for examination may be set aside or varied if the order is oppressive or unfair,[23] relying on the decision of Nicholson J in Re Rothwells Limited (No. 2).[24] Only a few months later Hayne J, in the Supreme Court of Victoria, in New Zealand Steel (Australia) Pty Ltd v Burton[25] said that fairness was not a ground of attack. As Hayne J stated, the question was whether the power was being used for a purpose foreign to that for which it was given. If it was, there was an abuse of process for that reason. If it was not, no question of fairness arises as the legislature has permitted the step to be taken.[26] I note that his Honour did not refer to Douglas-Brown or Rothwells and assume that he was not referred to those cases. Santow J discussed the matter of fairness in Vagrand Pty Ltd (in liq) v Permanent Trustee Australia Limited.[27] While I prefer the view of Hayne J on the matter, in the present circumstances it is not necessary to take that aspect of the discussion further. Neither counsel did so in their submissions, both being content merely to mention the point. Even if it is assumed that there is a ground of fairness or unfairness which might be a basis for attacking the orders for the issue of the examination summonses, the submission fails to be established on the facts.

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Judgment (116 paragraphs)

Cases Cited (4)