Harvey & Ors v Burfield & Smith as Liquidators of Normans Wines Limited

Federal Court of Australia|2022-08-18|Before: Markovic J

Paragraphs 9 and 10 of the interlocutory process filed by Paul Riik and Bookarelli Pty Ltd (Applicants) on 14 April 2022 (Interlocutory Process) be dismissed.
The Applicants pay the plaintiff/respondent's costs of the application for the relief sought in [9] and [10] of the Interlocutory Process.
The balance of the Interlocutory Process be listed for case management hearing on 1 September 2022 at 9.30 am AEST. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MARKOVIC J: 1 On 3 February 2022 a Registrar of this Court made orders pursuant to ss 596B, 596F and 597 of the Corporations Act 2001 (Cth) for the issuing of summonses for examination and orders for production in the liquidation of Babcock and Brown Limited (in liquidation) (BBL) (February 2022 Orders) including relevantly that: 1. Pursuant to section 596B of the Corporations Act 2001 that each of the following be summoned to attend the Federal Court of Australia on 4, 5 and 6 April 2022 until excused by the Court, to be examined on oath or affirmation about the examinable affairs of the Babcock & Brown Limited (In Liquidation) (Company): (a) Paul Riik; (b) Jerzy Bartkowski; (c) David Goldberg; (d) Mark Sutton; (e) Marcel Joukhador; (f) Lara Alfan; and (g) Sunni Mahatme (collectively, Examinees) 2. Pursuant to section 596F(a) of the Corporations Act 2001, it is directed that the scope of the examination of the Examinees will not extend to any matters regarding the merits, or issues in dispute, of the following proceedings: (a) Federal Court of Australia proceedings between Malcolm Pain and Others against David Lombe in his capacity as Liquidator of Babcock & Brown Limited (In Liquidation), NSD2105/2018 (Pain Proceedings), other than in respect of paragraph 57 of the plaintiff's Defence in the Pain Proceedings; and (b) High Court of Australia proceedings between David Lombe in his capacity as Liquidator of Babcock & Brown Limited (In Liquidation) and: i. Michael Masters and Others, S157/2021 (Masters Proceedings); ii. Bruce Broome and Others, S158/2021 (Broome Proceedings); and iii. Sarah Wilhelm and Others, S159/2021 (Wilhelm Proceedings). 3. Pursuant to section 597(9) of the Corporations Act 2001 (Cth) and rule 30.34 of the Federal Court Rules 2011, that each of the Examinees, Bookarelli Pty Ltd, Thomas Booler Lawyers and Harrow Legal Pty Ltd produce all books and records in their control as described in the draft orders for production that accompany this originating order at Annexures A to J (the Orders for Production). 2 On 14 April 2022 Paul Riik and Bookarelli Pty Ltd (together, Applicants) filed an interlocutory process seeking a number of orders including: (1) orders that any or all of the summonses for examination and the orders for production issued pursuant to the February 2022 Orders or, alternatively, the summons for examination issued to Mr Riik and the orders for production issued in aid of that summons, be set aside or discharged; (2) in the alternative, an order pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth) for review of the decision of the Registrar making the February 2022 Orders; (3) orders pursuant to s 596C(2) of the Corporations Act and r 11.3(7) and r 11.5(2) of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) that the affidavit filed by the plaintiff, David Lombe in his capacity as the liquidator of BBL (Liquidator), in support of the application to make the February 2022 Orders be made available for inspection on terms that the Applicants must keep that affidavit confidential and not disclose it; and (4) an order pursuant to r 2.32 of the Federal Court Rules 2011 (Cth) that the transcript of the proceeding before the Registrar which resulted in the making of the February 2022 Orders be made available for inspection by the Applicants or their legal advisors. 3 On 11 May 2022 I made orders to the effect that the relief sought by the Applicants for access to the confidential affidavit and the transcript of the hearing before the Registrar (see [2(3) and (4)] above, being the relief sought in [9] and [10] of the interlocutory process, be determined before the balance of the relief sought in that application. I made orders for the preparation of that aspect of the interlocutory process for hearing and listed it for hearing on 21 July 2022. 4 Having considered the evidence relied on and submissions of the parties, I would decline to make the orders sought by the Applicants in [9] and [10] of their interlocutory process and thus to grant them access to the confidential affidavit relied on by the Liquidator and the transcript of the proceeding before the Registrar. My reasons for reaching that conclusion are set out below.

BACKGROUND 5 BBL was first placed into voluntary administration on 13 March 2009 and, subsequently on 24 August 2009, by resolution of its creditors, into liquidation: see Grant-Taylor v Babcock & Brown Limited (in liquidation) (2015) 322 ALR 723; [2015] FCA 149 at [1] (Grant-Taylor v BBL). 6 In Grant-Taylor v BBL at [2]-[5] Perram J summarised the business of BBL and its demise as follows: 2 The shares in BBL were listed on the Australian Stock Exchange ('ASX') and the company enjoyed a reputation as a sophisticated and astute outfit in the world of finance. 3 The tightening of the credit markets which began in March 2008 exposed parts of its business model which were capital intensive to increasing pressures and, ultimately, it is these pressures which brought it undone. 4 The plaintiffs are persons or entities who purchased shares in BBL in the period between 21 February 2008 and 13 March 2009. Those shares had first been quoted on the ASX in October 2004. Between 2004 and the middle of 2007 the shares consistently escalated in value to a peak on 19 June 2007 of $34.63 per share. On 21 February 2008, when the first of the plaintiffs acquired their shares in BBL, they were trading at $16.76. They were last traded on 7 January 2009 at $0.33 when trading was suspended. 5 Oceans of money were lost in the 18 month descent in the share price from $34.63 to $0.33. Amongst these losses are those of the plaintiffs although, by reason of their relatively late arrival in the history of the stock at $16.76, they have avoided the Greek tragedy visited upon some of those who joined the party at $34.63. 7 Bookarelli is a litigation funding company which has been in business since 2004. Mr Riik is the sole director of Bookarelli. According to Andrew Giles, a consultant to Bookarelli, its trading activities are now relatively minimal and it is not currently funding any new litigation. 8 Since BBL's collapse a number of proceedings have been brought by various of its shareholders against the Liquidator and, in some cases, BBL as follows: (1) proceeding no NSD2070/2012 brought by Andrew Grant-Taylor and 77 other claimants (Grant-Taylor Proceeding); (2) proceeding no NSD2525/2013 brought by Michael Masters and 99 other claimants (Masters Proceeding); (3) proceeding no NSD947/2014 brought by Bruce Broome and 886 other claimants (Broome Proceeding); (4) proceeding no NSD501/2015 brought by Sarah Wilhelm and 233 other claimants (Wilhelm Proceeding); and (5) most recently, proceeding no NSD2105/2018 brought by Malcom Pain and 312 other (Pain Proceeding). 9 Bookarelli was the funder of the Grant-Taylor Proceeding and each of the proceedings which made up the Combined Proceedings (see [10(2)] below]. It is also the funder of the Pain Proceeding. Mr Giles explains that the Pain Proceeding is the main outstanding litigation which remains funded by Bookarelli. 10 Insofar as the various proceedings described in [8] above are concerned: (1) in relation to the Grant-Taylor Proceeding: (a) on 4 March 2015 Perram J made orders dismissing the proceeding with costs: see Grant-Taylor v BBL; (b) the applicants then appealed from those orders. Their appeal was subsequently dismissed with costs: see Grant-Taylor v Babcock & Brown Limited (In liquidation) (2016) 245 FCR 402; and (c) the applicants applied for special leave to appeal to the High Court of Australia and that application was dismissed with costs; (2) the Masters Proceeding, the Broome Proceeding and Wilhelm Proceeding (Combined Proceedings) were heard together. In relation to those proceedings: (a) on 18 October 2019 orders were made in the Combined Proceedings dismissing those proceedings with costs: see Masters v Lombe (Liquidator); In the Matter of Babcock & Brown Limited (In Liq) [2019] FCA 1720; (b) the applicants in the Combined Proceedings appealed from those orders. On 3 September 2021 their appeal was dismissed with costs: see Masters v Lombe (in his capacity as liquidator of Babcock & Brown Limited (in liq)) [2021] FCAFC 161; (2021) 392 ALR 326; and (c) the applicants in the Combined Proceedings then sought special leave to appeal to the High Court. On 8 April 2022 that application was refused with costs; and (3) on 23 October 2019 the Pain Proceeding was adjourned sine die with liberty to relist the proceeding for a case management hearing. According to Mr Riik the applicants in the Pain Proceeding intend to approach the Court to have the proceeding relisted and to file an amended statement of claim. 11 Mr Riik says that, because of disclosures which have been made on behalf of the Liquidator, he has a fair idea of the questions which may be put to him at the proposed examination and that he understands that the Liquidator will seek to adduce evidence on the following topics: (1) whether Bookarelli or the "shareholder plaintiff" intentionally and/or for improper purposes held back the lodging of proofs of debt; and (2) the capacity or ability of Bookarelli to pay any costs which may be sought from it.

LEGISLATIVE FRAMEWORK AND LEGAL PRINCIPLES 12 Section 596A of the Corporations Act provides for mandatory examinations. It requires the Court to summon a person for examination about a corporation's examinable affairs if an eligible applicant applies for the summons and the person is or was an officer or provisional liquidator of the corporation at specified times. 13 Section 596B of the Corporations Act provides for discretionary examinations. It enables the Court to summon a person for examination about a corporation's examinable affairs if an eligible applicant applies for the summons and the Court is satisfied, relevantly, that the person may be able to give information about examinable affairs of the corporation. 14 Section 9 of the Corporations Act defines the term "examinable affairs" as follows: "examinable affairs", in relation to a corporation means: (a) the promotion, formation, management, administration, restructuring or winding up of the corporation; or (b) any other affairs of the corporation (including anything that is included in the corporation's affairs because of section 53); or (c) the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation's examinable affairs because of paragraph (a) or (b). 15 Section 53 of the Corporations Act relevantly provides: For the purposes of the definition of examinable affairs in section 9, section 53AA, 232, 233 or 234, paragraph 461(1)(e), section 487, subsection 1307(1) or section 1309, or of a prescribed provision of this Act, the affairs of a body corporate include: … (d) any act or thing done (including any contract made and any transaction entered into) by or on behalf of the body, or to or in relation to the body or its business or property, at a time when: … (iv) the body is being wound up; and, without limiting the generality of the foregoing, any conduct of such a receiver or such a receiver and manager, of an administrator of the body, of an administrator of such a deed of company arrangement, of a restructuring practitioner for the body, of a restructuring practitioner for such a restructuring plan, of a person administering such a compromise or arrangement or of a liquidator or provisional liquidator of the body; and … 16 Section 596C of the Corporations Act concerns the filing of an affidavit in support of an application under s 596B. It provides: (1) A person who applies under section 596B must file an affidavit that supports the application and complies with the rules. (2) The affidavit is not available for inspection except so far as the Court orders. 17 Section 596F of the Corporations Act enables the Court, subject to s 597, to give directions about examinations including a direction about the matters to be inquired into at an examination. 18 Section 597 of the Corporations Act concerns the conduct of an examination. Relevantly s 597(9) empowers the Court to direct a person to produce at an examination of that or any other person books in that person's possession which are relevant to the matters to which the examination relates or will relate. 19 As is apparent from the statutory scheme, the starting proposition is that the affidavit relied on in support of an application for the issue of a summons under s 596B of the Corporations Act is not available for inspection unless the Court "otherwise orders": see s 596C(2) of the Corporations Act and r 11.3(7) of the Corporations Rules. 20 Re Excel Finance Corporation Ltd (Receiver and Manager appointed); Worthley v England (1994) 52 FCR 69 concerned several appeals, one of which was an appeal from orders made setting aside subpoenas issued at the request of an examinee. By those subpoenas the examinee sought the production of documents relating to the application made under s 597 of the Corporations Law for the issue of the examination orders pursuant to which he was to be examined. At the time, s 597 of the Corporations Law permitted the Australian Securities Commission or a "prescribed person" to apply to the Court for an order for examination of that person and for the Court to order that the person attend for examination on any matters relating to the "promotion, formation, management, administration or winding up of, or otherwise relating to the affairs of, the corporation concerned". The power to make the order was, as is the case for s 596B of the Corporations Act, discretionary. 21 Commencing at 93 a Full Court of this Court (Gummow, Hill and Cooper JJ) considered the question of disclosure of material relied on in support of an application for an examination summons. Their Honours held that the Court had a discretion to order disclosure to a prospective examinee of material lodged in support of an application for an examination order "and should do so where the justice of the case requires". They continued (at 93-94) as follows: It does not follow that the Court would permit every examinee or potential examinee to have access to such material. There are sound reasons why inspection should not be freely granted for so to do could afford to an examinee information which could permit the examination process to be frustrated: cf per Sir George Jessel MR in Re Gold Co (supra). There could also be confidential information which should properly be withheld. However, we agree with Nourse LJ in Re British and Commonwealth Holdings Plc (at 355): … inspection of the statement should prima facie be allowed where the court is of the opinion that it will or may be unable fairly and properly to dispose of the application if part of the evidence is withheld from the person against whom the order is sought. It will then be for the officeholder to satisfy the court that confidentiality in whole or in part is nevertheless appropriate. An applicant will not be permitted access to such material to enable him or her to "fish" for a case. There must be materia1 before the Court from which it appears that the applicant has an arguable case, to which the material is relevant, before the discretion should be exercised in favour of that applicant. But once that appears the discretion will normally be exercised in favour of the application. 22 In Re Ltd (in liq); Sheahan v Pitterino (1997) 77 FCR 81 Mansfield J considered, among other things, an application for access to the affidavit relied on by the liquidator of Moage Limited (in liquidation) in support of an application under s 596B of the then Corporations Law for the issue of summonses to give evidence in relation to the affairs of that company and under s 597(9) of the Corporations Law for orders for production of certain books and records. The applicants had also applied to discharge the examination summonses and orders for production. 23 At 92 his Honour referred to the purpose of an examination under s 596A or s 596B of the then Corporations Law as follows: The purpose of an examination under s 596A or B of the Act is primarily to enable a liquidator or some other eligible applicant to bring an examinee before the Court to procure information about the affairs of a corporation. This is not the occasion to review the scope of the legitimate exercise of that power, or where its boundaries are exceeded. That may arise in the course of determining the various motions to discharge the examination orders and the production orders. It is sufficient for present purposes to note that it is established clearly by authority that it is a legitimate use of that power by a liquidator to obtain information which might assist in the conduct of litigation. Such information may be sought whether or not proceedings are sought to be commenced or to be continued. It may be sought to identify the nature and extent of evidence available to support a claim in proposed or actual proceedings, and to determine the probability or otherwise of success in those proposed or actual proceedings. It may be sought to assess the prospects of recovery in proceedings. It should also be noted that the mere fact that proceedings have been commenced does not, of itself, mean that the examination power cannot be used, or that its use in relation to those existing proceedings is necessarily an abuse of process on the part of the liquidator: see generally Hamilton v Oades (1989) 166 CLR 486 ; Hong Kong Bank v Murphy (1992) 28 NSWLR 512; Gerah Imports Pty Ltd v Duke Group Ltd (In Liq) (1993) 61 SASR 557; Worthley; Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301. 24 His Honour observed that the discharge of the examination summonses in that case would only be made out "if the purpose of the liquidator in procuring the examination orders was an impermissible one" and that the relevant test as identified by the Full Court in Re Excel Finance was "whether the person seeking the examination order has the purpose of obtaining a forensic advantage otherwise not available": at 93. 25 At 94 Mansfield J noted that the applicants had to establish some reason why the Court should exercise its discretion to make the otherwise confidential affidavit available for inspection. His Honour referred to the decision of the Full Court in Re Excel Finance and, in particular, the propositions gleaned from the passages set out at [21] above. At 95 his Honour said: The fundamental judgment is based upon what the justice of the case in the particular circumstances demands. In making that determination, regard will need to be had to the content of the affidavit, so that where appropriate the purpose of the examination is not frustrated or confidential information or potentially significant information which might if released impinge upon an effective examination is not inappropriately released. If there are no particular considerations arising from the affidavit or its terms, or from the material referred to, then provided that the applicant for the release of the affidavit presents "an arguable case" or some sensible grounds for maintaining the application, to which the affidavit is relevant, then generally the discretion will be exercised in favour of that applicant. The context of those observations of the Full Court illustrate that the expression "arguable case" was not used as a refined term of art. In my view, it is an unnecessary and ultimately sterile inquiry at this point of the proceedings to determine whether it is necessary upon the ultimate hearing of the application to discharge the examination orders to decide whether the alleged inappropriate purpose of the liquidator need be his sole purpose or only a predominant purpose. Similarly, I think it is both inappropriate and sterile for the purposes of the present applications to seek to attribute some scientific exactitude to the degree of satisfaction of "an arguable case" which needs to be made out by the applicant. In my view it involves no more than that the Court requires to be satisfied to an appropriate level of satisfaction that the applicant is not pursuing the application without good cause or without good reason, and in particular is not doing so purely in the hope that, by procuring the release of the affidavit, some evidentiary foundation for the allegation will be made out. And: It must also be borne in mind that, at this stage of the proceedings, the Court is not adjudicating in point of fact upon whether the purpose is, or is likely to be, made out in any sense. It is asked only to review the material presented to it, absent the affidavit, to determine whether the application is brought making such allegation without any foundation or with a foundation which is not frivolous or without some rational basis. What will satisfy the necessary degree of arguability will vary from case to case, and will need to be assessed in all the particular circumstances. 26 In Secatore, in the matter of Last Lap Pty Ltd (in liq) [2020] FCA 627 at [75]-[76] Anderson J set out the process for determining whether access to a supporting affidavit should be granted: 75 Where a party applies for access to the supporting affidavit on the basis that there is an arguable case that the issue of a summons for examination is invalid, the court must first determine whether such a case is established on the material before the Court other than the supporting affidavit. Once the court is satisfied that an arguable case is established, it should then inspect the supporting affidavit itself and form a view as to whether or not it is in the interests of justice to permit the applicant to access the affidavit: Ariff at [22]; Accord at [103]; Re Bell Group (No 1) at [143]. 76 The court should usually grant the applicant access to the affidavit prior to forming a final view as to the merits of any challenge to the validity of the summons for examination: Re Moage at 95; Re Leisure Development at [42]; Fetzer at [27]; Ariff at [23]; Re Bell Group (No 1) at [143]. As Austin J expressed in Re Leisure Development at [42], "it is of critical importance for the applicants to be informed about the specific matter which the liquidator intends to investigate by the examination process. Without knowing and being able to assess that information, the applicants cannot present a plausible case of abuse of process". 27 In their interlocutory process, the Applicants seek orders setting aside, permanently staying or discharging the summonses and orders for production as an abuse of process. In Walton v ACN 004 410 833 Limited (formerly Arrium Limited (in liquidation) [2022] HCA 3; 96 ALJR 166 the High Court considered whether orders for examination made by a Registrar of the Supreme Court of New South Wales pursuant to s 596A of the Corporations Act amounted to an abuse of process. Relevantly the Australian Securities and Investments Commission authorised the appellants, who were shareholders in the respondent (which I will refer to as Arrium), as "eligible applicants" under the Corporations Act for the purpose of applying to the Court for the summons in issue. Thereafter the appellants applied to the Supreme Court for orders under s 596A that the third respondent, a former director of Arrium, appear for examination and produce documents and also sought orders that the second respondent, Arrium's auditor, and the bank which advised it on its capital raising in 2014 produce certain documents. A Registrar of the Supreme Court made the orders. 28 Arrium, the auditors and the bank sought to have the orders stayed or set aside. At first instance that application was unsuccessful. Arrium sought leave to appeal. The New South Wales Court of Appeal granted leave to appeal, allowed the appeal and discharged the orders for examination. The Court of Appeal identified the question before it to be whether the purpose of the examination was foreign to the purpose for which the statutory power under s 596A of the Corporations Act was conferred and found that it was because the examination was sought for a private purpose, for the benefit of a limited group of persons who had bought shares in Arrium at a particular time and not for a purpose which conferred a demonstrable benefit on Arrium or its creditors or all of its contributories. 29 The central question before the High Court (as identified by Kiefel CJ and Keane J) was: what is the statutory purpose or purposes of an examination under s 596A? Their Honours noted that if the predominant purpose for which an application is made under s 596A (or s 596B) is collateral or foreign to the statutory purpose of an examination the application will amount to an abuse of process: at [19]. 30 In relation to circumstances in which an abuse of process might arise, at [21] Kiefel CJ and Keane J said: Abuses of process in connection with an application for an examination summons may take many forms. An application brought by a liquidator for an examination for the purpose of rehearsing the cross-examination of a potentially hostile witness in pending litigation would likely be an abuse of process. Other examples may include the cross-examination of a person to destroy their credit and to obtain de facto discovery when an order for discovery has been refused. In these examples, the applicant is seeking a forensic advantage not otherwise available by ordinary pre-trial processes where the legislative purpose is not advanced. They have in common that they are purposes foreign to the statutory purpose, and do not permit the exercise of the statutory power. To do so would be an abuse of that power. In those circumstances it would be an abuse of the processes of the court to seek the exercise of the power. 31 To like effect (at [93]) Gageler J observed that the "possible varieties of abuse of process are limited only by human ingenuity and the categories are not closed" and that abuses of process will ordinarily fall into one of three categories: "(1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute": see too at [130] per Edelman and Steward JJ. 32 As set out above, the present application concerns access to the affidavit relied on by the Liquidator in support of his application for the issue of summonses pursuant to s 596B of the Corporations Act. The parties agreed that the principles which governed the circumstances in which such an affidavit would be released applied equally to the transcript of the ex parte application for issue of the summonses.

SHOULD ACCESS BE GRANTED? 33 The Applicants submitted that they have an arguable case for each and all of the orders sought by them in their interlocutory application; that is that they have an arguable case that the summonses and orders for production should be set aside or discharged. They raise six possible grounds on which they say that those summonses and orders for production will be set aside or discharged. I address each one below, noting that in order to succeed on this application the Applicants need to show an arguable case for their discharge or setting aside and, if they do, that it is in the interests of justice to permit access to the affidavit.

Ground 1: inconsistency on the face of the Registrar's orders 34 The first ground on which the Applicants seek to discharge the summonses and orders for production is because they contend that they will be unworkable as a result of the order made by the Registrar pursuant to s 596F(a) of the Corporations Act. As set out at [1] above, the February 2022 Orders include an order that the examinations are not to extend to any matters regarding the merits, or issues in dispute, in, among others, the Pain Proceeding other than in respect of [57] of the Liquidator's defence filed in that proceeding. 35 The Applicants submit that the "waiver or exclusion" from the limitation on the examinations imposed by the order made pursuant to s 596F(a) of the Corporations Act will result in unworkable examinations and that the scope for abuse of the waiver is too great when the wording of [56] and [57] of the Liquidator's defence are so similar. They say that there is an arguable case that the Registrar, having decided to exclude [56] of the defence from the scope of the examinations, acted erroneously by making an order allowing examination in relation to matters arising from [57] of the defence. The Applicants submit that access to the confidential affidavit will be needed to determine any reasons for and correctness of the decision to allow this "obvious inconsistency". 36 The Applicants also submitted that the orders for production are not the subject of the same limitation and thus there is an unexplained discrepancy, as I understand it, between the subject matter of the examinations and the terms of the orders for production. 37 Paragraphs [56] and [57] of the Liquidator's defence in the Pain Proceeding provide as follows: 56. Says in answer to the whole Claim that, if judgment is given in favour of the defendant in proceedings numbered NSD2525/2013, NSD947/2014 and NSD501/2015 (or those proceedings are dismissed) the Respondent is entitled to summary judgement pursuant to section 31A of the Federal Court Act and/or rule 26.01(a) of the Federal Court Rules, alternatively the proceedings be permanently stayed as an abuse of process. 57. Says further in answer to the whole Claim that the proceedings should be permanently stayed or dismissed on the basis that the bringing of the proceedings is an abuse of process, alternatively is the subject of an Anshun estoppel, by reason that these proceedings could have and should have been instituted and brought before the court for determination at the same time as proceedings numbered NSD2525/2013, NSD947/2014 and NSD501/2015. 38 In summary, by [56] of his defence the Liquidator says that the proceeding should be summarily dismissed or stayed as an abuse of process and by [57] of his defence he contends that the proceeding should be permanently stayed or dismissed as an abuse of process or because it is the subject of an Anshun estoppel. 39 To the extent that [56] and [57] of the Liquidator's defence plead that there should be a permanent stay because the proceeding is an abuse of process, there is a degree of overlap between them. However, that does not necessarily lead to a conclusion that there is an inconsistency or that the examinations will be unworkable. The order made pursuant to s 596F(a) limits questioning in relation to the Pain Proceeding to matters arising under [57] of the defence. Any objections taken to questions because they seek information beyond the matters pleaded in [57] of the defence can be the subject of adjudication by the Registrar before whom the examinations are conducted. That there is some overlap or commonality between the subject matter of [56] and [57] of the defence does not make adjudication on any such objections impossible or the conduct of the examinations unworkable. 40 Insofar as the orders for production are concerned, they call for categories of documents which the Registrar can consider on their terms, as opposed to a summons for examination where the actual topics for examination are not known at the time application is made for their issue. That being so, in contrast to an application for an examination summons, the Registrar can assess the ambit of the orders for production at the time application is made for their issue. 41 In light of the above I am not satisfied that the alleged overlap in the defence and/or the absence of the limitation found in the examination summonses from the orders for production give rise to an arguable case for the discharge of the examination summonses. But, even if that was not the case, the ground can be determined on the face of the February 2022 Orders, the orders for production and the relevant paragraphs of the Liquidator's defence. Access to the confidential affidavit is not required to fairly and properly dispose of that ground.

Ground 2: the issue of the summonses is an abuse of process 42 The second ground on which the Applicants seek to discharge or set aside the summonses is because they are an abuse of process. The Applicants submit that is so because: (1) there are existing and proposed proceedings; (2) the proceeding is not brought by BBL or the Liquidator but rather is a proceeding against the Liquidator; (3) there is a proposed proceeding within that proceeding, namely the summary dismissal application foreshadowed by the Liquidator; (4) the matters which are the subject of the summonses for examination and orders for production occurred after BBL was placed into liquidation and do not involve dealings with BBL; (5) the subject matter appears to be about the process of lodging proofs of debt with the Liquidator and the conduct of litigation against the Liquidator; (6) the Liquidator could, but chose not to, avail himself of, or therefore be restricted by, ordinary processes such as issuing subpoenas or notices to produce; (7) Mr Riik's honesty has already been placed in issue in relation to the service of the examination summons; (8) Mr Riik will be examined and his credibility tested; (9) the Liquidator wants to gather evidence in a way that an ordinary litigant would not be permitted; and (10) the purpose of the evidence is to support the Liquidator's foreshadowed application for a permanent stay of proceedings against him as liquidator. 43 The Applicants accepted that the Liquidator is entitled to obtain examination summonses and orders for production for the purpose of determining the prospects of success of litigation to which the company may be a party. But they contend that the fact that there are proceedings on foot makes it necessary for the Court to be alert to the possibility that the application for the examination summonses and the orders for production may have been for an improper purpose and that their purpose is not to assist the Liquidator to collect in assets, investigate the conduct of BBL's officers or determine BBL's liabilities but to "fish" for evidence on procedural matters in litigation against the Liquidator. The Applicants submit that the rules of the Court applicable to subpoenas and discovery are restrictive compared to the power under s 596B of the Corporations Act and that there is an arguable case that the Liquidator is seeking an impermissible forensic advantage, which is an abuse of process. 44 It did not appear to be in dispute that the Liquidator's purpose in seeking the examination summonses and orders for production is to investigate issues relating to [57] of his defence in the Pain Proceeding and the financial viability of Bookarelli, the funder who stands behind the applicants in that proceeding. A legitimate use of the power under s 596B of the Corporations Act by a liquidator is for the purpose of obtaining information which might assist in the conduct of litigation; just because the proceeding has commenced does not mean that the power cannot be used: see Moage at 92. The Applicants accept as much. However, they contend that because the Liquidator is a respondent to the proceeding in question, the Court should proceed with caution and should be alert to the fact that the true purpose of the examinations may be to "fish" for information in relation to intended interlocutory applications by the Liquidator. 45 In my view that the Liquidator is, in this case, a respondent to the proceeding does not mean that his proposal to undertake examinations to investigate matters relating to his defence of it is not a proper use of the power under s 596B of the Corporations Act. Section 596B may be used to enable examination about a corporation's "examinable affairs". That term has an expansive definition. It is difficult to see how it does not encompass the Liquidator investigating matters relating to his defence of a proceeding brought against him which will ultimately affect the liability of the company and thus its creditors, including the merit of pursuing any defence or bringing any interlocutory application which may bring the proceeding to an end in a more expeditious fashion for the benefit of creditors. 46 The Applicants also contend that the examination of Mr Riik will enable the Liquidator to conduct a dress rehearsal of his cross examination in the proceeding in circumstances where Mr Riik's credibility has already been called into question in relation to service of the examination summons upon him. 47 The test for whether there will be an abuse of the power depends on the purpose of the examination, rather than the result. It may be that a consequence of the examination is that a dress rehearsal of a cross examination to take place in a subsequent trial is conducted. That would not amount to an abuse of the process. However, where the purpose of the examination is to conduct such a dress rehearsal or to destroy the credit of a witness to be called in pending or intended litigation that will amount to an abuse of the process: see Re Excel Finance at 91. 48 There is nothing before me to support the Applicants' contention that the true and sole purpose of carrying out the examination of Mr Riik is to conduct a dress rehearsal of his cross examination. I am unable to find any support for that contention, even on an arguable basis. The purpose of the examination appears to be for the Liquidator to obtain information in relation to whether he should pursue [57] of his defence. That Mr Riik will be examined and that this may be a dress rehearsal for any future cross examination in relation to the various issues on which examination is permitted is a consequence of the exercise of the power. There is no support for the contention that it is its purpose. 49 Mr Riik contends that his credit is in issue. In doing so I understand that he relies on evidence before me on this application in relation to service of the examination summons on him. The evidence filed on behalf of the Liquidator is to the effect that the summons was despatched for service by post on 4 March 2022 and, according to the records of Australia Post, delivered on 7 March 2022. Mr Riik's evidence is that he did not receive the summons via post and that he first became aware of it on 23 March 2022 when his solicitor notified him that he had received a copy of the summons. 50 I do not think that this evidence, limited as it is to service of the summons, means that Mr Riik's credit is in issue and in any event it does not provide an arguable basis to contend that the Liquidator's purpose is foreign to the purpose for which the s 596B power is to be exercised. There is nothing before me to suggest that the Liquidator wishes to pursue his examination of Mr Riik for the sole purpose of undermining his credit. 51 Finally, that the Liquidator has available to him procedures for the production of documents under the Federal Court Rules in the conduct of the Pain Proceeding and could avail himself of those processes rather than the processes available to him by reason of s 596B and s 597 of the Corporations Act does not assist the Applicants. I am not satisfied that the early production of documents in accordance with those provisions, as opposed to their production by way of orders for discovery or the issue of subpoenas, gives rise to an arguable basis that there is an abuse of the process. The production and access to that material at this stage by way of production pursuant to the orders for production, which I accept is a process not available to an ordinary litigant, is but a consequence of the exercise of the power under s 596B and s 597 of the Corporations Act. 52 It follows from the above that I am not satisfied that the Applicants have made out an arguable case that the summonses and orders for production should be set aside as an abuse of process for the reasons they raise.

Ground 3: scope of "examinable affairs" 53 The third ground relied on by the Applicants concerns the definition of "examinable affairs" in the Corporations Act. In short the Applicants contend that the matters which appear to be the subject of the examinations fall outside the definition of "examinable affairs". 54 The Applicants contend that they have an arguable case in relation to their contention that the matters to be the subject of the examination go beyond the "examinable affairs" of BBL. They say that this is because the financial affairs of Bookarelli are irrelevant or immaterial to any matters which could fall within the examinable affairs and the subject matter which Mr Riik is capable of commenting on is clearly limited. The Applicants submit that the contents of the confidential affidavit may provide evidence of the Liquidator's opinion of the acceptable boundary of examinable affairs, particularly having regard to the order made under s 596F(a) of the Corporations Act. 55 As I have already observed, s 596B of the Corporations Act confers a discretion on the Court to summon a person for examination about a company's "examinable affairs" where an eligible applicant makes an application for issue of a summons and the Court is satisfied of the matters set out in s 596B(1)(b). 56 In Jane v Secatore (Liquidator), in the matter of Last Lap Pty Ltd (in liq) [2021] FCAFC 108 at [14] a Full Court of this Court (Davies, Charlesworth and Jackson JJ) relevantly said: Ground 1 proceeds on the misconception that the examination process cannot be used to investigate and ascertain whether something does, or does not, form part of the examinable affairs of a corporation. There must be a factual basis for the Court to form a view that the purpose for which the eligible applicant has applied for a summons relates to the examinable affairs of the Company, and not for some extraneous purpose, but where on the known facts a relationship with the examinable affairs of the corporation is shown, that relationship is sufficient to enliven the Court's power under s 596B. The Court need only be satisfied that the proposed examinee is a person who "may" be able to give information "about" examinable affairs of the corporation - that is, about matters bearing on the examinable affairs of a company…. It is not the function of the court issuing the summons to determine the scope of the examinable affairs of the corporation. That takes place within the context of the examination, the very purpose of which is to enable an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation and to identify the corporation's assets and liabilities, amongst other purposes: Wainter Pty Ltd, in the matter of New Tel Limited (in liq) ACN 009 068 955 (2005) 145 FCR 176; [2005] FCAFC 114 at [252]. The purpose of the examination is not to be pre-empted by the court determining for itself, in an application for the issue of a summons under s 596B, the very matter to be the subject of the examination, where the eligible applicant is able to demonstrate that the subject matter relates to, or arises, from the examinable affairs of the company. The primary judge was correct to hold that it is for the court conducting the examination to deal with questions as to whether a matter does not concern the corporation's examinable affairs: Kimberley Diamonds Ltd v Arnautovic (2017) 252 FCR 244; [2017] FCAFC 91 at [16]-[17]; s 597 of the Act. 57 The definition of "examinable affairs" in the Corporations Act is very wide (see [14]-[15] above). It relevantly includes any act or thing done by or in relation to a body corporate, or its business or property when being wound up and, without limiting the foregoing, any conduct of a liquidator: see s 9 and s 53(d) of the Corporations Act. 58 Mr Riik is the sole director of Bookarelli, the funder of the Pain Proceeding and other proceedings which have been brought on behalf of shareholders in BBL. As the Liquidator submitted it is apparent that he may be able to give information about matters relating to those proceedings, which are things done in relation to BBL while being wound up and which call into question the conduct of the Liquidator, in particular in rejecting proofs of debt. If it is contended that any particular question put to Mr Riik (or any other examinee) goes beyond the "examinable affairs" of BBL, that objection will be the subject of adjudication by the Court at the time of the examination. 59 In those circumstances I am not satisfied that there is an arguable case that the matters which appear to be the subject of examination fall outside of the definition of "examinable affairs" for the purpose of granting access to the confidential affidavit.

Ground 4: scope of orders for production 60 The fourth ground concerns the orders for production. The Applicants contend that they make no reference to the limitations in the scope of the examinations and, on their face, seek documents which assist in the proof of [56] of the defence which is excluded from the examinations. Separately the Applicants submit that the confidential affidavit will assist in considering the reasons for the apparent inconsistency between the scope or limitation of the examinations and the orders for production. I have already considered this aspect of the fourth ground at [39] above. 61 The Applicants also submit that the Liquidator has conceded that the orders for production required amendment by reducing their scope by 97% and that they seek documents which are the subject of claims for legal professional privilege. The Applicants contend that the orders for production were and remain oppressive and liable to be set aside pursuant to applications that have been made to the Registrar. They say that there is more than an arguable case that the orders for production should be set aside. 62 Correspondence between the parties that was in evidence before me demonstrated that the Liquidator was prepared to limit the scope of the orders for production. By letter dated 17 March 2022 from Johnson Winter & Slattery, the solicitors for the Liquidator, to Vaikom Law, the solicitors for Bookarelli, the Liquidator offered, in order to "facilitate the just, quick and cheap resolution of the real issues in [the] matter", to limit the scope of all of the orders for production in line with annexure A as defined in that letter. 63 On 5 April 2022 orders were made by a Registrar of this Court amending the scope of the orders for production. Those orders were expressed to be made "[w]ithout admission by Bookarelli that the Orders for Production issued pursuant to order 4 of the [February 2022 Orders] have been amended or varied and without prejudice to any application which Paul Riik or Bookarelli may wish to make". 64 That the Liquidator agreed to reduce the scope of the orders for production does not mean that those orders were oppressive in the terms in which they were issued nor does the fact that they call for documents which may be subject to a claim for legal professional privilege mean that they are liable to be set aside. 65 The reduction in the scope of the orders suggests that it is unlikely that the Applicants will be able to establish that they are oppressive. Further, if any of the documents called for by the orders for production are subject to a claim for legal professional privilege, they can be produced subject to that claim. The question of whether any such claim should be upheld is a matter to be determined by the Court on another occasion.

Ground 5: waiver of confidentiality 66 The fifth ground on which the Applicants seek to discharge or set aside the summonses concerns a form of waiver. The Applicants submit that by openly disclosing the purpose of their investigations to be undertaken via the proposed examinations, the Liquidator has waived any rights of confidentiality in the confidential affidavit, particularly as there is no prejudice to the Liquidator from disclosing the contents of that affidavit. 67 The Applicants contend that the reason for confidentiality of the affidavit relied on in support of the orders made pursuant to s 596B of the Corporations Act is to provide a liquidator with some forensic advantage in the way in which the examinations are to be conducted. They acknowledge that the Court recognises that disclosure of the confidential affidavit could frustrate the examination process or highlight the events and issues in respect of which the Liquidator says that he wants to examine Mr Riik. However, they note that Mr Riik's evidence is that the Liquidator's solicitor has already revealed in open court the purpose of the examination and that Mr Riik already has a good idea of the likely questions with the Liquidator admitting that "Mr Riik can hardly be taken by surprise by this proposed line of questioning". 68 The Applicants also submit that it is "somewhat obvious" from the exception to the limitation of the scope of the examinations and the content of the orders for production that there is a particular subject matter for the examinations. 69 In Harvey & Ors v Burfield & Smith as Liquidators of Normans Wines Limited (receivers and managers appointed) (in liq) [2003] SASC 192 the Supreme Court of South Australia considered three applications for the setting aside of orders made by a Master of that court and the discharge of summonses and orders for production issued pursuant to those orders under s 596B and s 597 of the Corporations Act. One of the orders sought in the applications made by the examinees was that under s 596C(2) of the Corporations Act they be permitted to inspect the confidential affidavits filed in support of the applications. 70 An argument in support of the application for access to the confidential affidavits was that the liquidators acted for an improper purpose in obtaining the orders. For the purpose of the interlocutory applications, the liquidators each swore an affidavit setting out, among other things, their purpose in seeking the orders. It was argued by the examinees, the applicants on the interlocutory applications, that the court should not rely on those statements of purpose unless it was prepared to make an order giving the applicants leave to inspect the confidential affidavits. They submitted that if the liquidators were permitted to rely on a statement of purpose made after the hearing before the Master then, on principles analogous to an implied waiver of privilege, the court should make an order allowing them to inspect the confidential affidavits. That submission was rejected. In response to it at [42] Besanko J said: In a broad sense there might be some common considerations but there are also significant differences between the reasons for the doctrine of the implied waiver of privilege and the matters relevant to the Court's discretion to make an order under s 596C(2). For example, one of the reasons for confidentiality is to prevent the frustration of the examination process. The matters relevant to whether the Court should order disclosure of confidential affidavits were discussed by the Full Court in Re Excel Finance … 71 The Applicants did not submit that the decision in Normans Wines was plainly wrong. Rather they said that it could be distinguished because in Normans Wines the applicants and the liquidators argued that there were different purposes for the examinations. That is the applicants did not accept the liquidators' purpose as stated in their affidavits whereas here the Applicants and the Liquidator are ad idem as to the stated purpose for the examinations, namely to obtain information in relation to the Liquidator's intended application to strike out or stay the Pain Proceeding. 72 The factual basis on which the Applicants seek to distinguish the decision in Normans Wines does not assist them. The reason identified by Besanko J for rejecting the submission that there was some form of waiver did not turn on the fact that the parties differed as to the intended purpose of the examinations in that case but on an analysis of the principles applicable to, and the reasons for, the doctrine of implied waiver and the matters to be taken into consideration when making an order under s 596C(2) of the Corporations Act and an appreciation of their differences. That reasoning applies equally here. The Applicants must show that they have an arguable case that the issue of the summonses exceeded the power of the Court and that access to the affidavit was likely to assist in determining the correctness of the challenge to the summonses. They have not done so. 73 In any event, that Mr Riik believes that he knows the subject matter of the examinations is not to the point. He may well be generally aware of the broad topic to be canvassed but it is unlikely that he will know the detail of the intended examinations and the course they may take.

Ground 6: review of the Registrar's decision 74 The final ground relied on by the Applicants concerns the alternate relief they seek for review of the Registrar's decision under s 35A(5) of the Federal Court Act. 75 The Applicants say that in relation to that relief the Liquidator will have to make a forensic decision on that application as to whether to rely on the confidential affidavit. The Applicants submit that if the Liquidator chooses to rely on it in the review process, the affidavit will be available to them and if he chooses not to rely on it, the Liquidator's application for orders under s 596B and s 597 of the Corporations Act will fail. The Applicants contend that the Liquidator is able to make a decision at this time and, in accordance with the overarching purpose, should inform the Court if he will file and serve the very same affidavit relied on before the Registrar in the review process. 76 The Applicants' interlocutory process seeks, in the alternative a review of the decision of the Registrar which culminated in the February 2022 Orders. To the extent that relief is pressed, there will be a hearing de novo of the Liquidator's application. That means that the Liquidator's application will be considered afresh based on the evidence and the law at the time of the review hearing: see Bechara v Bates (2021) 286 FCR 166 at [17]. 77 It will be a matter for the Liquidator at the relevant time to determine the evidence on which he wishes to rely. It may be the confidential affidavit or a different affidavit. At this stage the content of the Liquidator's affidavit is not known and the Liquidator is not required to forewarn the Court of the evidence on which he intends to rely. It remains the case that for the Applicants to obtain an order for access to the confidential affidavit they must satisfy the Court of the matters referred to at [33] above. 78 On the basis of the material relied on by the Applicants I am unable to come to a view about any application for review and whether the Applicants have an arguable case for opposing the Liquidator's application for orders under s 596B and s 597 of the Corporations Act. To the extent they will argue that the orders are sought for a purpose not permitted by, in particular s 596B or that the summons or orders for production seek material or evidence which is not within the examinable affairs of BBL, my comments at [52] and [59] above apply equally. 79 Accordingly I am not satisfied that the Applicants have an arguable case. Further, given the nature of a review hearing, I am not satisfied that, even if they did, the affidavit would be likely to assist in determining that application. As to the latter it will be for the Liquidator to file and serve the evidence on which he intends to rely on the review hearing. The material before the Registrar may ultimately have no role to play in such an application.

CONCLUSION 80 For those reasons the Applicants have not made out their entitlement to the relief sought in [9] and [10] of their interlocutory process. Accordingly, those prayers for relief should be dismissed. 81 As they have been unsuccessful the Applicants should pay the Liquidator's costs of their application for the relief in [9] and [10] of their interlocutory process. 82 I will make orders accordingly. I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.

SCHEDULE OF PARTIES NSD 1359 of 2021 Interested Persons Interested Person: THOMAS BOOLER LAWYERS Interested Person: BOOKARELLI

Corporations Act 2001(Cth)ss 9, 53, 596A, 596B, 596C(2)

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (21)