Non-disclosure
29 The principles relevant to an ex parte application for an examination summons are well-settled. There is a "heavy obligation upon the person applying for the examination summons to make full and frank disclosure of all matters which may impact upon the decision to summon a person for examination about a corporations [sic] examinable affairs": In the matter of Mendarma Pty Ltd (in liq) [2006] NSWSC 1306 at [45], cited with approval in Re Hunter Bulk Material (subject to a deed of company arrangement) [2011] NSWSC 467; 83 ACSR 436 at [51] per Ward J. The obligation has been variously described as, "no lesser than that imposed upon a party seeking an injunction ex parte" (Re Southern Equities Corporation Ltd (in liq); Bond v England (1997) 25 ACSR 394 at 422 per Lander J); requiring the party "to take the place of the absent party to the extent of bringing forward all the material facts which that party would have brought forward in defence of the application" (Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 at [38] per Allsop J citing Thomas A Edison Ltd v Bullock (1912) 15 CLR 678 at 681-82 per Isaacs J), " an absolute one, owed to the Court… materiality is to be decided by the Court, and not by the assessment of the plaintiff or his legal advisers" (Orpen v Tarantello [2009] VSC 143 at [27] per Beach J).
30 The consequence of obtaining an ex parte order in breach of the duty of disclosure is that it is liable to be discharged without any hearing on the merits. The necessity for such a consequence was explained by Fisher J in Town & Country Sports Resorts (Holdings) Pty Ltd & Ors v Partnership Pacific Ltd [1988] FCA 557; 20 FCR 540 at 543:
The rationale behind the principle is clear; it is of the utmost importance in the due administration of law that the Courts and the public are able to have confidence that an ex parte order has been made only after the party obtaining it has complied with its duty to disclose all relevant facts.
31 In the present case, the interlocutory applicants contended that the Orders appeared to be irregular in that no order was made pursuant to r 1.34 of the Rules dispensing with compliance with r 4.01(2), which prohibits a corporation proceeding in the Court other than by a lawyer. In circumstances where Mr Bax appeared before the Registrar and evidently prepared the summonses issued to the applicants, this raised an arguable case that there had been a failure to inform the Court not merely that he had been struck off the roll of solicitors on 12 May 1998 (Attorney-General v Bax [1999] 2 Qd R 9) but also the reasons why he had been struck off, and the subsequent refusal by the Court of Appeal for his readmission in 2021: Bax v Legal Practitioners Admission Board [2021] QCA 93 (Bax QCA).
32 Secondly, it was submitted that the basis on which the Queensland Court of Appeal refused Mr Bax's readmission raised an arguable case that the full and frank disclosure required of an ex parte applicant has not been made and that there was therefore a basis to permit the applicants' lawyers access to the s 596C affidavits and the transcript of the hearing before the Registrar. As to the latter, no transcript is available.
33 The parties urged that, if I were satisfied that an arguable case of non-disclosure had been raised, then I should adopt the approach of Ward J in Re Hunter Bulk Materials at [44] and inspect the s 596C affidavits myself in order to determine the issue as to whether access should be given based on my review thereof. I formed the view that there was an arguable case of non-disclosure to which the content of the affidavits must logically be relevant. I therefore reviewed the affidavits in chambers. That review confirmed that disclosure had been less than adequate.
34 In the course of oral submissions by counsel for Capital Options, it transpired that the Registrar had in fact granted Mr Bax leave to appear on behalf of Capital Options. To the extent that it was submitted that the Orders were irregular because leave was not given, the submission must be rejected. That does not detract from the application brought under r 3.11 of the Rules for the Court to review the exercise by the Registrar of the power to issue the summonses.
35 In his affidavit, Mr Bax referred to the "unfettered discretion to dispense with the requirements of r 4.01(b)" but did not apparently refer the Registrar to the principles relevant to the exercise of the discretion. Nor did Mr Bax's affidavit disclose that he was the sole shareholder and director of Capital Options, only that he was "a" director.
36 Mr Bax did disclose that he was struck off the roll. He did not, however, disclose that his application for re-admission in 2020 was dismissed by the Court of Appeal in 2021, nor the Court of Appeal's very dim view of his conduct as described by Holmes CJ (Mullins JA and Crow J concurring) in Bax QCA at [71]:
Nor do I consider that the public interest and the interests of the profession would appropriately be safeguarded were the applicant to be readmitted, whatever conditions might be applied. Indeed, it seems to me that if the public were made aware that an applicant were readmitted in circumstances where he had displayed an indifference to requirements of the Corporations Act and some of his obligations as a tax agent; had not only failed to follow proper procedure in the collection of evidence, but apparently had been oblivious to the need to do so; had generally behaved in an unforthcoming way in his dealing with a regulatory authority; and had been unable to grasp what it was that was required of him, notwithstanding the clear statement of the Court in his presence; their confidence would in fact be eroded.
37 Further, over three paragraphs of his affidavit, Mr Bax represented that he had appeared, with leave, for Capital Options in many previous matters including in the Federal Circuit Court of Australia, and the Supreme Court of Queensland, and for other corporations of which he was a director at the relevant time in the Magistrates Court of Queensland, the Local Court of New South Wales, the District Court of Queensland and the Queensland Civil and Administrative Tribunal. He did not disclose the dates of those appearances. Most significantly, he did not disclose that he had been refused leave in 2020 to appear in the District Court Proceedings.
38 Moreover, Mr Bax deposed that he "knew how to conduct" himself in Court: Aff-CSB at [16]. He did not disclose the following passages of the Court of Appeal's judgment [68]-[69]:
Another matter of concern is the applicant's apparent inattention to the Court's intimation on the first hearing date as to the need for evidence showing that he believed himself a director. That was the very basis on which an adjournment was granted. It is difficult to understand how somebody who sought to practise in law could manage not to take any note, literally or figuratively, of what the Court had indicated was required (nor apparently, make any enquiry of his solicitors, if he were unable to hear what was said), before setting about the preparation of material for the resumed hearing.
As to the preparation of that material, one of the most perturbing features of this case is the applicant's willingness to prepare affidavits for other witnesses by cutting and pasting from his own. It was not merely a matter of infelicitous language. It did, contrary to submission, bear on the credibility of the evidence … If the applicant were, for example, an inexperienced first-time applicant for admission, this disregard for the need to ensure that witnesses gave their versions independently might be forgivable. But the applicant had practised as a lawyer at the level of partner and indeed had continued to litigate over recent years.
39 The statement in his affidavit that, "No disadvantage was suggested to either the Plaintiff or any Defendant by the grant of leave to me to represent the Plaintiff" (Aff-CSB at [24]), is evidence of his continuing failure to grasp the proper conduct of proceedings, particularly in the context of an ex parte application.
40 The principles relating to the exercise of the Court's discretion to permit a company to commence and carry on proceedings other than by a solicitor were discussed at some length by the Full Court in Molnar Engineering Pty Ltd v Burns, E.J [1984] FCA 201; 3 FCR 68. As was said by Smithers J at 75:
it has been regarded as appropriate that when a trader decides to use the corporate form in which to carry on his business for the advantages flowing thereform his accessibility to the courts as plaintiff and his appearance as a defendant should be made conditional as set forth in [r 4.01(2)].
41 Relevant factors for the Court to consider include: the consequence of depriving the Court of assistance on matters of law; the possibility it might render difficult the proper assessment of fact; whether the company has insufficient funds to engage legal assistance; the class and financial structure of the company; the identity of the shareholders; and the spread of shareholding.
42 In exercising the discretion to permit Capital Options to proceed with its application other than by a solicitor, and in granting Mr Bax leave to appear for Capital Options, the Registrar was not made aware of several of the various matters in relation to Mr Bax outlined above, from which it could reasonably be concluded that Mr Bax was not a proper person to conduct the proceedings on behalf of Capital Options: AA Shi Pty Ltd v Avbar Pty Ltd (No 4) [2010] FCA 878 at [34] per Collier J. The failure of Capital Options, through Mr Bax, to disclose those matters is sufficient to discharge the Orders.
43 There were, however, other undisclosed matters going beyond the issue of leave to appear and which touch upon whether the summonses ought to have issued at all.
44 In respect of both the mandatory examinees and the discretionary examinees, there was no dispute that Capital Options was authorised by ASIC as an "eligible applicant" for the purposes of Div 1 of Part 5.9 of the Corporations Act in relation to Consortium. I interpolate that the mandatory examinees and Mr Kippin filed an application for judicial review of ASIC's authorisation decision on 24 April 2023. (It was agreed that application should await the outcome of these applications.) There was also no dispute that the mandatory examinees were officers of Consortium during or after the 2 years ending when the winding up began.
45 As to the discretionary examinees, it was submitted for Mr Kippin that there was no justification or practical utility to issue an examination summons directed at him given his role as an advisor to the Board of Directors. It is submitted that it appears the purpose of the summons directed to Mr Kippin is to obtain information about the transfer and the assignment.
46 On behalf of Mr Falconieri, who was the solicitor with the conduct of Consortium's defence in the District Court Proceedings, it was submitted similarly that the proposed examination is neither sufficiently justified, nor would it have any practical utility, in the sense explained by the Full Court in Kimberley Diamonds Ltd v Arnautoviuc [2017] FCAFC 91; 252 FCR 244 at [24]. Similarly to Mr Kippin, it appears the purpose of the summons directed to Mr Falconieri is to obtain information about the transfer and the assignment.
47 Relevant to the Court's review of the exercise by the Registrar of the power to issue summonses to the discretionary examinees, the following matters were not disclosed on the ex parte application:
(1) the nature or existence of the District Court Proceedings;
(2) the BDO Report.
48 The failure of Capital Options, through Mr Bax, to disclose those matters is sufficient to discharge the summonses directed to Messrs Kippin and Falconieri.
49 Further, non-disclosure of the nature and existence of the District Court Proceedings and the BDO Report taints the summonses directed to both the mandatory examinees and the discretionary examinees. That is because perusal of that material would have revealed to the Registrar that the predominant purpose of the examinations sought under both s 596A and s 596B was collateral to the external administration.