Hill v Smithfield Service Centre [2002] NSWSC 999 | Case summary

2808/02 LEMI HILL V SMITHFIELD SERVICE CENTRE PTY LTD (IN LIQ) JUDGMENT 1 HIS HONOUR: Smithfield Service Centre Pty Ltd ("SSC") is a company in liquidation. On 22 May 2002 the Deputy Registrar in Equity issued an examination summons under s 596A of the Corporations Act in respect of SSC, on the application of Lemi Hill (also known as Lambros Hilellis). The summons is directed to Roderick McKay Sutherland, who is the receiver and manager of SSC. 2 Mr Sutherland has come before the Court with an interlocutory application to discharge the order for the issue of the summons. Because the Corporations Rules would otherwise require that such an application be made within three days of the Deputy Registrar's orders, Mr Sutherland also seeks an order that the time for the filing of his application be extended pursuant to Corporations Rule 1.10 or generally, to the date of the filing of the interlocutory application, namely 22 July 2002. If I decide that the application should otherwise succeed, I shall make the order extending time, as it has not been suggested that Mr Hill will suffer any prejudice by virtue of the lateness of the application. Facts 3 SSC was incorporated in November 1992. Mr Hill was a director of the company from November 1992 until November 1996. He has been a shareholder of the company from its incorporation, and he claims to be a substantial creditor. I shall deal with the issues raised by Mr Sutherland's application on the basis that Mr Hill is a creditor of the company, although it appears there is some doubt as to whether that is so. 4 On 14 March 1997 SSC and a company called Sherwat Pty Ltd purchased a property at Meeks Road Marrickville as tenants in common for $1.35 million. 5 On 8 July 1998 Mr Sutherland was appointed receiver and manager of SSC by a secured creditor, Mobil Oil Australia Ltd. On 7 August 1998 Michael Wayland was appointed administrator of SSC, and then pursuant to a resolution of creditors he became liquidator of the company on 29 October 1998. 6 After his appointment Mr Sutherland, as receiver and manager, set about realising assets of SSC. On 4 January 1999 he caused SSC to commence Supreme Court proceedings No 1003 of 1999 against Sherwat for the appointment of trustees for sale over the Marrickville property pursuant to s 66G of the Conveyancing Act 1919 (NSW). He sold SSC's interest in the Marrickville property, as receiver and manager on behalf of SSC, to Sherwat, the co-owner, on 27 April 1999. 7 Mr Hill believes that this sale was at an undervalue, and that it is therefore open to challenge. He claims that a better price was submitted to Mr Sutherland on behalf of a company called Sitecot Pty Ltd (apparently a company representing Hill family interests), and that Mr Sutherland's solicitor purported to continue to negotiate without disclosing that Mr Sutherland had already entered into a contract to sell to Sherwat. He wishes to examine Mr Sutherland concerning the circumstances of the sale. Any right to set aside the sale would, of course, be SSC's right rather than Mr Hill's, and therefore his interest in the matter is only indirect and his primary recourse would be to persuade SSC's liquidator to take proceedings. Any benefit that he might obtain from SSC having the Marrickville property re-sold at a higher price, or from SSC recovering the undervalue, would flow from the enhanced ability of SSC to pay its creditors and contributories, including him. 8 Mobil Oil Australia Ltd obtained a judgment against Mr Hill, as guarantor for a debt owed to it by SSC, in the sum of $971,114.50 on 4 August 1999. It filed a creditor's petition against Mr Hill on 23 October 2001, and served the petition on Mr Hill on 14 November 2001. On 29 November 2001 a sequestration order was made against Mr Hill pursuant to the petition. 9 Later in 1999 SSC commenced a proceeding against Mobil for misleading conduct, with funding provided by HIH Insurances, which later collapsed. The proceeding has been stayed pending the plaintiff satisfying an order to provide security for the defendant's costs. Counsel for Mr Hill informed me, although there is no direct evidence of this, that his client relies on his belief in the validity of the claim as an explanation for not disclosing the bankruptcy proceedings to ASIC in the circumstances that I shall explain. 10 On 18 July 2001 Mr McDonald, counsel for Mr Hill, wrote to ASIC applying for Mr Hill to become an eligible applicant under s 596A of the Corporations Act. The application was made after Mobil entered judgment against Mr Hill but before the creditor's petition was issued. ASIC sought further information on 21 August 2001 and Mr McDonald provided information on 8 November 2001, after the issue of the creditor's petition but before it was served on Mr Hill. On 16 November 2001 ASIC authorised Mr Hill to apply for an examination summons against Mr Sutherland, as an eligible applicant. 11 Mr Hill did not disclose to ASIC, prior to its decision on 16 November 2001, the fact that the creditor's petition had been served on him on 14 November 2001. He did not subsequently disclose to ASIC the fact of service of the creditor's petition or the subsequent making of a sequestration order. 12 As I have said, Mr Hill made application by originating process for the issue of an examination summons on 22 May 2002. He did not disclose to the Court his status as a bankrupt when he made that application. The examination summons was issued by the Deputy Registrar on the same day, made returnable on 1 August 2002. However, subsequently an order was made adjourning the examination to abide the outcome of Mr Sutherland's interlocutory application. 13 On 23 May 2002 Mr Sutherland's lawyers wrote to Mr Hill's lawyers noting that Mr Hill was a bankrupt and that his trustee in bankruptcy had not authorised the bringing of the proceeding for the issue of an examination summons. The letter asserted that as a bankrupt, Mr Hill had no legal standing to bring the proceeding. On 27 May 2002 Mr Hill's lawyers responded, confirming that Mr Hill was a bankrupt, while asserting that he did not require the permission of his trustee in bankruptcy to make an application for the examination summons to be issued. Curiously, the letter raised a doubt as to whether the application for the examination summons was made by the solicitor's client. It is hard to understand why that was done. 14 On 29 May 2002 Mr Sutherland's lawyers wrote to ASIC seeking a statement of ASIC's reasons for its decision, pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 28 of the Administrative Appeals Tribunal Act 1975 (Cth). On 6 June 2002 ASIC responded, declining to provide any statement of reasons. It is unnecessary for me to consider whether ASIC's attitude was lawful and justified, but I should note that there is no statement of ASIC's reasons in evidence before me. There was further correspondence on this point, but neither Mr Sutherland's lawyers nor ASIC changed their positions. 15 ASIC's final position was set out in its letter to Mr Sutherland dated 19 July 2002, declining Mr Sutherland's invitation to revoke its earlier decision. The letter said that ASIC only became aware that Mr Hill was a bankrupt when that was communicated by Mr Sutherland's solicitor in June 2002. After referring to other matters, the letter concluded: "ASIC considers that the propriety of Mr Hill conducting the examination where he has been declared bankrupt since being authorised by ASIC to be an eligible applicant, is a matter for resolution between Mr Hill, his trustee in bankruptcy and yourself. ASIC sees no reason to consider revoking its authority to Mr Hill as it was given under appropriate circumstances." 16 I was informed by counsel for the applicant and for the respondent, from the bar table, that ASIC is aware of Mr Sutherland's interlocutory application and does not wish to appear or make submissions. 17 On 2 July 2002 ASIC wrote to Paul William Gidley, Mr Hill's trustee in bankruptcy, inquiring whether Mr Gidley was aware of ASIC's decision to accredit Mr Hill as an eligible applicant, and whether Mr Gidley had formed any intention in relation to the proposed examination of Mr Sutherland. On 5 July 2002 Mr Gidley wrote to Mr Hill seeking details of the claim and any legal advice obtained. On 22 July 2002 Mr Gidley wrote to Mr Hill giving formal notice of his election to discontinue the examination proceeding pursuant to s 60 of the Bankruptcy Act 1966 (Cth). 18 The attitude of Mr Wayland, the liquidator, to Mr Sutherland's application is in contest, to a degree. However, it is clear that Mr Wayland has not at any time sought to examine Mr Sutherland under the Corporations Act. Examination under the Corporations Act 19 Section 596A of the Corporations Act 2001 (Cth), which is in Division 1 of Part 5.9, is headed "mandatory examination". It provides, relevantly, as follows: "The Court is to summon a person for examination about a corporation's examinable affairs if: (a) an eligible applicant applies for the summons; and (b) the Court is satisfied that the person is an examinable officer of the corporation…". 20 The definition of "examinable officer", in relation to a corporation, in s 9, includes "(b) a receiver and manager of property of the corporation (whether appointed under a provision in an instrument, or by a court)". Mr Sutherland, being a receiver and manager of property of SSC appointed under a provision in an instrument, is an examinable officer in relation to SSC, and has been continually since his appointment on 8 July 1998. 21 The definition of "eligible applicant" in s 9 includes: "(e) a person authorised in writing by ASIC to make: (i) applications under the Division 1 of Part 5.9 in which the expression occurs; or (ii) such an application in relation to the corporation". ASIC gave written authorisation to Mr Hill to be an eligible applicant in relation to SSC on 16 November 2001, and has not revoked that authority. Mr Hill is therefore unquestionably an eligible applicant. The Corporations Act does not state any conditions for the exercise of ASIC's discretion to give such a written authority, and does not set out any particular criteria for ASIC to take into account. 22 Therefore, as far as the provisions of the Corporations Act are concerned, Mr Hill has had, since 16 November 2001, a statutory right to apply to the Court to summon Mr Sutherland for examination about SSC's examinable affairs. When he made his application on 22 May 2002, the Court was required by s 596A to issue a summons accordingly. Consequences of Mr Hill's bankruptcy 23 Mr Sutherland contends, however, that the Court should intervene to discharge the summons because of Mr Hill's bankruptcy. He makes his case on two grounds, namely that Mr Hill has no standing to bring an examination proceeding because of the bankruptcy, or alternatively, that the examination summons is oppressive as an abuse of process, because the bankruptcy deprives Mr Hill of any sufficient interest to maintain the application for examination. 24 Section 58 (1) (a) of the Bankruptcy Act 1966 (Cth) provides that where a debtor becomes bankrupt, the "property of the bankrupt" vests forthwith in the Official Trustee or (if there is one) the registered trustee of the estate of the bankrupt. The effect of this provision, in the case of Mr Hill, is that his proprietary rights as a shareholder and creditor of SSC (if he was a creditor) have come to be vested in his trustee in bankruptcy. He no longer has those rights and therefore he does not have any financial interest in any proceedings that may be brought on behalf of SSC for the recovery of assets, other than an indirect contingent interest. His contingent interest arises because his bankrupt estate may receive a distribution from any recovered property, as Mr Hill was a creditor and contributory of the company, and any such distribution would reduce the debts owing in his bankruptcy. 25 Section 60 (2) of the Bankruptcy Act provides as follows: "An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action." 26 The term "action" is defined in s 60 (5) to mean any civil proceeding, whether at law or in equity. "Action" is to be given a wide meaning: Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 54A per Kirby P. In that case it was held that a proceeding in the nature of a prerogative writ to challenge orders by the Industrial Commission was an action for the purposes of s 60 (2). It is plain that a proceeding for the issue of an examination summons is an action for the purposes of s 60 (2). Counsel for Mr Hill did not contest this point. 27 Section 60 (4) preserves for the bankrupt the right to continue certain categories of actions in his or her own name, including an action in respect of "any personal injury or wrong done to the bankrupt, his or her spouse or a member of his or her family". The exemption is limited to cases where the benefits to be derived from litigation are not legitimately entitlements of the bankrupt's creditors: Daemar v Industrial Commission of New South Wales, at 56C per Kirby P. An examination proceeding under s 596A of the Corporations Act does not fall within the exemption. 28 The policy underlying s 60 (2) was stated forcefully by Manning J in Want v Moss (1889) 10 LR (NSW) 274. Having concluded that the subsection applied to the facts before him, his Honour said (at 279): "In my opinion it would be monstrous if it were not so. It could never have been contemplated that a bankrupt, who can have no means to pay costs if he fails, should be allowed to go on and put the plaintiff to trouble and expense… . It is a proceeding at law and is commenced by a bankrupt, and as it has now been abandoned by the official assignee, the only person who has any interest in the matter, I am clearly of opinion that it cannot be allowed to continue." 29 The policy was reiterated by the Full Federal Court in Fuller v Beach Petroleum NL (1993) 43 FCR 60 at 68: "It is consistent with the policy of the Act that after sequestration of the estates of unsuccessful litigants the successful party not be put at the risk of sustaining further costs of appellate litigation." 30 This passage was quoted with approval by the majority (Brennan CJ, Gaudron and McHugh JJ) in the same case (sub nom Cummings v Claremont Petroleum NL): (1996) 185 CLR 124 at 131. In that case the appellants were the defendants in proceedings for substantial damages for conspiracy and deceit, breach of directors' duties, and contraventions of the companies legislation and the Fair Trading Act. They became bankrupt after judgment had been reserved but before it was delivered. They then purported to exercise their statutory rights to appeal from the judgments against them. The respondent challenged the competence of the appeals, and was successful in the Full Federal Court and the High Court. The High Court treated the appeals as separate actions for the purposes of s 60 (2), but held that the subsection did not apply because the appeals were commenced after the bankruptcies of the appellants. After pointing out the anomaly that would arise if a bankrupt could bring an action commenced after bankruptcy although any action commenced before bankruptcy would be automatically stayed under the subsection, the Court proceeded to hold that the appellants had no standing to appeal, for reasons I shall explain below. 31 The anomaly identified by the majority of the High Court in the Claremont case would arise in this case as well, if Mr Hill were to be permitted to continue the examination process. Mr Hill became bankrupt when the sequestration order was made against his estate on 29 November 2001 (see Bankruptcy Act, s 5, definition of "bankrupt"). If he had made his application for the issue of an examination summons before that date, s 60 (2) would have applied, and the application would have been stayed automatically. This suggests that the legislative policy underlying the Bankruptcy Act, and in particular s 60 (2), supports Mr Sutherland's application for an order discharging the examination summons. The question is whether there is an appropriate ground for making that order, in light of the clear provisions of the Corporations Act. Standing 32 In the Claremont case the majority said (at 131) that the anomaly identified above would be avoided only if the appellants, upon becoming bankrupt, had no locus standi to institute the appeal either (i) because their rights to appeal were property vested in their respective trustees or (ii) because the fact that the judgment was enforceable only against property vested in the trustee meant that the appellants ceased to have the interest necessary to give a right to appeal. 33 Counsel for Mr Sutherland developed both of these grounds in argument before me. As to the first, he submitted that the statutory right to bring a proceeding for the issue of an examination summons is "property of the bankrupt" for the purposes of s 58 (1) (a), since it is a right in the nature of a chose in action and therefore property. On the other hand, counsel for Mr Hill submitted that an applicant for examination does not have a proprietary right because (citing Re Scharrer; ex parte Tilly (1888) 20 QBD 518) the witness in an examination is the witness of the Court. I agree that the witness is the witness of the Court, but in my opinion that does not establish that the applicant's right is non-proprietary. There are, however, other grounds for reaching the conclusion asserted on behalf of Mr Hill. 34 According to the majority in the High Court (at 133), not every substantive right has the character of property, and that character is not to be inferred merely because the right is a creature of statute. The concept of property takes its precise meaning from the context in which it is applied, as Hill J observed in the Full Federal Court in Beach Petroleum (43 FCR at 70). 35 Section 58 (1) (a) does not speak of "property" in the abstract, but of "the property of the bankrupt", distinguishing between after-acquired property and other property of the bankrupt. Section 60 deals separately with legal proceedings, suggesting that not every right to bring legal proceedings should be treated as property of the bankrupt for the purposes of s 58. Section 116 (1) (a) provides that all property that belongs to or was vested in the bankrupt at the commencement of the bankruptcy is property divisible amongst creditors of the bankrupt. Section 116 (1) (b) includes in the property divisible amongst creditors "the capacity to exercise, and to take proceedings for exercising all such powers in, over, or in respect of property as might have been exercised by the bankrupt for his or her own benefit…". The majority in Claremont held that the right of appeal does not fall within s 116 (1) (a) or (b). Subparagraph (b) does not apply because there is no property "over or in respect of" which the bankrupt was or would have been capable of exercising power (at 133; see also Re Burton; Wily v Burton (1994) 126 ALR 557). Similarly, in the present case, the capacity to take a proceeding for the issue of an examination summons does not involve the exercise of a power over or in respect of property. 36 In my opinion a statutory procedural right to obtain information, such as the right contained in s 596A of the Corporations Act, is not "property of the bankrupt" for the purposes of s 58 (1) (a), just as it is not property divisible amongst creditors for the purposes of s 116. It follows that the making of the sequestration order against Mr Hill did not automatically divest him of the right to continue with the present proceeding. 37 The majority in Claremont rejected the first ground for denying standing to the appellants, but they accepted the second ground, holding that the appellants ceased to have the interest necessary to give them a right to appeal once they became bankrupt. Counsel for Mr Sutherland seeks to extend the majority's reasoning to the present case. 38 Their Honours pointed out that the respondents before the Court, as judgment creditors, were confined to their right to prove against the bankrupt estates of the appellants, and that neither of the appellants had any entitlement to any of the property in their respective estates (at 137). Applying Heath v Tang [1993] 1 WLR 1421, they concluded (at 137-8): "So far as a judgment entered in an action against the bankrupt creates or evidences a provable debt, we respectfully agree that the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts." 39 The majority held (at 138) that it was immaterial that success in the appeal might increase the assets of the bankrupts' estates or even produce a surplus: "A bankrupt's contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights and, that being so, it cannot give him an interest to appeal to minimise liabilities." 40 They observed that the power to prosecute the appeal is vested in the trustee in bankruptcy, and if the trustee declines to exercise the power in circumstances unfair to the bankrupt, the bankrupt may apply to the Court under s 178 of the Bankruptcy Act, which gives the Court a large discretion to make such order as it thinks just and equitable. 41 In my opinion, the majority's reasoning depends upon the fact that the question before the High Court was whether the bankrupts could exercise a right of appeal in respect of a judgment against them. The bankrupts did not have a sufficient financial interest because the only assets out of which the claim against them could be satisfied had vested in their trustees in bankruptcy. The passage quoted by the majority from Hoffman LJ's judgment in Heath v Tang was under the heading "the bankrupt as defendant", and there was another section of the judgment headed "the bankrupt as plaintiff", where the issue explored was whether the right upon which the bankrupt sought to sue was property of the bankrupt that had vested in the trustee. In the present case Mr Hill wishes to conduct an examination evidently for the purpose of causing a recovery action to be taken by SSC against Mr Sutherland. His position is more akin to "the bankrupt as plaintiff" than "the bankrupt as defendant". Analytically, the question that arises is whether the right which he seeks to vindicate has been vested in his trustee in bankruptcy. The question whether he has a "financial interest", of a kind sufficient to support a right of appeal, does not arise. 42 Moreover, Mr Hill's lack of a financial interest is not relevant to Mr Hill's standing in view of the terms of s 596A and the definition of "eligible applicant". It would have been relevant for ASIC to consider whether Mr Hill had a sufficient connection to the examinable affairs of SSC to justify the issue of a written authority constituting him an eligible applicant. Mr Hill's bankruptcy after ASIC made its initial decision ought to have been an important factor in ASIC's decision not to revoke the authority after it found out about the bankruptcy, because of the effect of the bankruptcy on Mr Hill's assets and liabilities. If an application had been made for judicial review or review on the merits of ASIC's decision not to revoke the authority (assuming that the decision was reviewable), it would have been appropriate for the tribunal considering that application to explore whether ASIC properly took into account the effect of Mr Hill's bankruptcy. But the application before me now is not an application to review or reconsider ASIC's decision. It is therefore not relevant for me to consider whether Mr Hill's lack of a financial interest to continue with the examination process has deprived him of his standing to do so. His standing arises from the fact that he is an eligible applicant, and his status as such arises from a decision of ASIC which I cannot look behind. 43 My conclusion is that, notwithstanding the decision in the Claremont case, Mr Hill had standing to apply for the issue of an examination summons on 22 May 2002, and he continues to have the standing to prosecute this proceeding. The only remaining question is whether it would be oppressive as an abuse of process for him to do so. Abuse of process 44 The evidence of Mr Hill is that he is concerned that the best price possible for SSC's share of the Marrickville property was not obtained by Mr Sutherland. This implies, in my view, that Mr Hill wishes to examine Mr Sutherland in order to obtain evidence that might support a claim against him, or his appointor, for appropriate relief for improper exercise of the receiver's power of sale. That relief may include an order setting aside the sale or an order for compensation measured by the difference between the price obtained for the sale of SSC's share and the price that would have been obtained had a proper sale taken place. In my opinion, Mr Hill's predominant purpose in pursuing the examination of Mr Sutherland is to support a contemplated proceeding for some such order. A proceeding of this kind would assert SSC's rights rather than any right of Mr Hill. Subject to the possibility of a derivative action, the proceeding would be commenced in the name of SSC by its liquidator. 45 Counsel for Mr Sutherland submitted that the examination summons is oppressive, because it is an abuse of process. He said it is an abuse of process because Mr Hill, as a bankrupt, has no present or relevant connection with, or interest in, the company, either as shareholder or as creditor, that might provide a legitimate basis for conducting an examination of Mr Sutherland. Counsel submitted that Mr Hill's connection with the company, at the time he obtained authority from ASIC on 16 November 2001, ceased immediately when he became a bankrupt on 29 November 2001. In this regard, counsel submitted that it is significant that Mr Hill did not disclose to ASIC, prior to its decision on 16 November 2001, the existence of a pending creditors' petition; and that he did not subsequently disclose to ASIC the making of a sequestration order on 29 November 2001. Likewise, counsel submitted that it is significant that the plaintiff made no disclosure of his status as a bankrupt to the Court when applying for the issue of the examination summons (citing Re Network Welding Pty Ltd (in liq) (No 2) [2001] NSWSC 809). 46 Non-disclosure of material information to ASIC would be a relevant consideration if this Court had been asked to review ASIC's decision to grant authority to Mr Hill. It would not be relevant if the Court were reviewing ASIC's decision to decline to withdraw Mr Hill's authority, because by that time ASIC was aware of the bankruptcy. However, as I have said, the present application is not an application for review of any decision by ASIC. The question is whether the application for the issue of an examination summons, and continuation of that procedure, involves any abuse of process by Mr Hill. 47 If Mr Hill were pursuing the examination of Mr Sutherland for a legitimate purpose, I would regard him as being entitled to do so even though he did not disclose his bankruptcy to ASIC. Non-disclosure of the bankruptcy to the Court seems to me to be immaterial in this case, given that the Court has no discretion but to issue an examination summons under s 596A if the applicant is an eligible applicant (as Mr Hill was) and the examinee is an examinable officer (as Mr Sutherland was). I note that Re Network Welding was a case arising under s 596B, under which the Court has a clear discretion. In the present case, the question of non-disclosure to the Court or to ASIC is not determinative. 48 A finding of abuse of process depends upon the predominant purpose of the person using the court's process. The relevant principles were described by the Full Federal Court in Re Excel Finance Corp Ltd (1994) 52 FCR 69; 14 ACSR 407; compare, as to the issue of the summons under s 81 of the Bankruptcy Act, Karounos v Official Trustee (1988) 80 ALR 66. As the Full Court explained in the Excel case, a distinction has been drawn, in some English cases, between an application for the issue of an examination summons when the applicant has commenced or contemplates litigation, and an application where no litigation is in contemplation and the examination is sought to assist the liquidator in a general way in the liquidation. Australian jurisprudence has rejected that distinction in favour of what the Full Federal Court called (14 ACSR at 426) "the more useful test" of whether the person seeking the examination order has the purpose of obtaining a forensic advantage not otherwise available. 49 More useful the test may well be, but, with respect, it is not always an easy test to apply. Some of the Australian cases appear to turn on whether the examination is in aid of actual or contemplated litigation brought by some party other than the company, for the advantage of that party rather than the company, or is litigation for the benefit of the company (14 ACSR at 427). If that were the key distinction, then Mr Hill's examination of Mr Sutherland would not be an abuse of process, because his purpose seems to be to assist SSC to recover the full value of the Marrickville property from Mr Sutherland or his appointor. In my opinion, however, that distinction reflects or is an application of the true test, and is not a substitute for it. 50 In the present case, a number of factors lead together to the conclusion that it would be an abuse of process for Mr Hill to continue with the examination, even though he obtained an order for the issue of the examination summons as an eligible applicant and he retains that status. The factors are these: (1) since becoming a bankrupt, Mr Hill no longer has (according to the reasoning in the Claremont case) a financial or other interest in the pursuit by SSC of recovery action against Mr Sutherland or his appointor, even though recovery may be of some indirect benefit to him; (2) if the examination summons had been issued before Mr Hill's bankruptcy, the proceeding would have been stayed under s 60 (2) of the Bankruptcy Act, and it would be anomalous if the proceeding were allowed to continue simply because the bankruptcy occurred before the application was made by the bankrupt; (3) Mr Hill's trustee in bankruptcy has elected against proceeding with the examination; (4) any cause of action for recovery in respect of the sale of the Marrickville property at an alleged undervalue would be SSC's cause of action, subject to the possibility of a derivative proceeding; (5) the liquidator of SSC has not sought to examine Mr Sutherland under the Corporations Act, as he might have done. 51 These factors lead to the conclusion, in my opinion, that Mr Hill's predominant purpose is an illegitimate one. Its illegitimacy lies not in the fact that implementation of the purpose would benefit Mr Hill rather than SSC, but in the fact that those whose primary responsibility is to pursue such matters, namely the liquidator and (to a lesser extent) the trustee in bankruptcy, have not taken steps to do so; and in those circumstances Mr Hill's purpose is to intermeddle in matters not directly of concern to him and thereby gain a forensic advantage not otherwise available to him. Conclusion 52 Mr Hill's predominant purpose being illegitimate in this fashion, it would be an abuse of process for him to take any further steps towards the examination of Mr Sutherland. Therefore the proper course is to discharge the Deputy Registrar's order for the issue of the examination summons. I am disposed to order Mr Hill to pay Mr Sutherland's costs of the interlocutory application and the present proceeding, recognising of course that this will create an obligation subject to the provisions of the Bankruptcy Act, but I shall give the parties the opportunity to make brief submissions on costs. **********

Hill v Smithfield Service Centre

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