Home Office v Harman

Federal Court of Australia|1998-06-01|Before: Adam P, Carr J, Nicholson JJ, Foster J, Lee J, Nicholson J

REASONS FOR JUDGMENT THE COURT: The applicants seek leave to appeal from two interlocutory judgments of Carr J pronounced on 28 May 1998 and 24 June 1998. They move the application for leave be heard concurrently with each appeal and each application be expedited. (A) INTERLOCUTORY ORDER OF 28 MAY 1998 The first appeal proposed to be brought is from so much of the judgment of Carr J pronounced on 28 May 1988 as related to orders to the effect the respondents be relieved nunc pro tunc of the obligations to file and serve their witness statements, expert reports and analyses, witness notifications and tender bundles as provided for in pars 3(b) and (c), 6(a) and (b), 14 and 15 of orders made by him on 11 November 1997, save to the extent of disclosing certain discoverable documents. In the orders of 11 November 1997 Carr J had ordered that on or before 14 May 1998 the respondents file and serve any cash flow analyses of the Bell Group from on or about 26 January 1990 on which they seek to rely (par 3(b)) and any expert reports in relation to certain book values, actual values and cash flow analyses (par 3(c)) together with witness statements (par 6(a)) and a bundle of documents they propose to tender (par 6(b)). He further directed that where a party wished to call a witness who declined to give a witness statement, that party should inform the opposite party of the name, address and position of the witness and provide a precis (to the extent available to the party) of the evidence proposed to be tendered (par 14). In par 15 he directed on or before 22 June 1998 each party would advise the others of the names of witnesses whom they proposed to call at the trial but who will not be in a position to attend to give evidence. The witness statements and other documents referred to in the orders of 11 November 1997 are referred to compendiously as "the witness statements". Respondents' motion The motion before Carr J on 28 May 1998 relevantly sought eight orders in the alternative. The first was a declaration that the witness statements remained subject to client legal privilege. Secondly, restraint of examination of the respondents' proposed witnesses Messrs Aspinall or Simpson under the Corporations Law or similar legislation was sought. Alternatively, such restraint was sought in respect of any person who signed a witness statement on behalf of the first, second or third respondents or any person who declined to give a witness statement whose name had been notified. Alternatively again it was proposed the implementation of the paragraphs of the orders of 11 November 1997 be postponed pending undertakings by the eighth, ninth and twelfth applicants that no such examinations would be conducted. Further, an order was sought that the witness statements were subject to an obligation to use them only in the proceedings and not for the conduct of any examinations. The eighth possibility was that which his Honour ordered. Interlocutory reasons His Honour's reasons were as follows. He said the orders sought related to proposed examinations under the Corporations Law by the liquidators of the eight, ninth and twelfth applicants ("the liquidators") of two witnesses, Messrs Aspinall and Simpson, whom the respondent banks propose to call at the trial. All examinations were to take place in the Supreme Court and it was now intended by the liquidators the examinations be concurrent. His Honour then sketched the background of the proceeding. Relevantly he stated an order for examination of Messrs Aspinall and Simpson and others had been obtained in the Supreme Court of Western Australia on 18 July 1995. Mr Aspinall had been examined for four days starting on 2 July 1996. Meanwhile on 18 December 1995 the applicants commenced proceedings in this Court. This application had being proceeding through numerous interlocutory stages. On 11 November 1997 his Honour had fixed the trial for 3 August 1998 on the basis it would occupy three months. After dates were set for further examination in the Supreme Court on behalf of the liquidators, which did not proceed, Messrs Aspinall and Simpson applied to that Court for orders discharging or staying the examinations pending the trial. The application was dismissed by Heenan J on 7 May 1998. Carr J noted during the hearing before Heenan J it had been stated the proposed examinations of Messrs Aspinall and Simpson would traverse all questions in issue in the application in this Court and that evidentiary material served by the respondent banks on the applicants pursuant to the orders made by him on 11 November 1997 would be used in aid of such examinations. He referred to the reasons of Heenan J in which it was stated submissions had been made for the applicants to the effect the examinations would be a dress rehearsal of the cross‑examination contemplated at the trial. Accordingly it was submitted it would be oppressive to allow the examinations to proceed prior to the trial. Heenan J had held it was desirable the liquidators be in a position to present to this Court all of the relevant information and evidence which would support their case and it was appropriate for the liquidators to use the proposed examinations to that end even if a forensic advantage might be obtained thereby. Heenan J had expressly recognised the examinations could not be used to rehearse cross‑examination or destroy the credit of the witnesses. Carr J considered Heenan J had dismissed the application on behalf of Messrs Aspinall and Simpson largely because he felt the Presiding Registrar would be able to prevent injustice by the giving of directions and restraining questions in the course of any examinations.

Carr J continued by stating that in "the usual case" this Court should proceed on the assumption the Supreme Court would successfully prevent any oppressive use of the examinations, by which he meant the destruction of credibility, the conducting of a dress rehearsal of the cross‑examination at trial or any question whose predominant purpose was to obtain a forensic advantage which the liquidators did not have available to them from the ordinary pre‑trial procedures. He then distinguished this case as "a very unusual one", citing the history of the various steps both in the Federal and Supreme Courts. He considered the complexity of the principal application gave rise to real reservations by him concerning the extent to which the Supreme Court Registrar would be successful in controlling any oppression. He placed considerable weight on Heenan J's decision not to stay or adjourn the examinations and did not consider there was evidence before him that the course the liquidators proposed to take would frustrate the process of this Court if he were to modify his orders of 11 November 1997 in relation to the filing and serving of witness statements. As to the use which the liquidators wished to make of the respondent banks' witness statements his Honour referred to a letter of 27 May 1998 from the applicants' solicitors to the respondents' solicitors in which it was asserted the examinations could relate to matters made available through the orders of 11 November 1997. He considered the liquidators had thereby let it be known they wanted to use the documents for a different purpose than that which was before him when he made the orders of 11 November 1997. His purpose had been to facilitate the orderly and efficient disposition of the trial. He accepted the liquidators wished to use the documents as a frame-work for their examination of Messrs Aspinall and Simpson. He stated had he known of their intention he would have made appropriate orders to prevent "what I consider to be a misuse of the witness statements" ["the first appeal point"]. His Honour referred to a submission on behalf of the applicants pointing to the mandatory terms of s 596A of the Corporations Law. He disagreed this gave the liquidators any "right" to examine on the witness statements where the provision of them would have an impact on client legal privilege. He considered orders to facilitate such provision were discretionary and procedural. They were subject to subsequent revocation and variation if appropriate. He concluded: "On balance, in the particular circumstances of this case I think to compel the respondents to create and hand over to the applicant liquidators documents, that is, witness statements and the like, which but for the directions orders made on 11 November 1997 at this stage of the proceedings they would not otherwise have had available to them, so that they, the liquidators, may cross‑examine in separate proceedings a witness or two witnesses who are to give evidence at the trial of these proceedings would not be procedurally fair or in the interests of justice." He considered it would be "grossly unfair" to the respondents to allow the liquidator applicants to use the witness statements for the purpose which they propose ["the second appeal point"]. Accordingly he resolved to make the order in question which would not restrain the liquidator applicants from in any way conducting the examinations but would protect the client legal privilege said to be held under s 119 of the Evidence Act 1995 (Cth) ("the Evidence Act") and at common law. He said when the liquidators had finished their examinations they may have the witness statements upon an undertaking to the Court not to use them for any purpose other than the conduct of this proceeding. Grounds of appeal The grounds of appeal as pressed in oral argument focus on the two points for his Honour's reasoning previously identified as appeal points. The first is that the proposed use of the witness statements in the examination was "a misuse". The second is that there would be gross procedural unfairness in the liquidators cross-examining in separate proceedings. Essentially it is contended the law recognises the right of a liquidator to examine in respect of witness statements pursuant to s 596A of the Corporations Law. It is contended his Honour's view of the law misunderstands the intention of Parliament in the relevant section and is based on an incorrect view of the right of a liquidator in the circumstances. Statutory provisions The section of the Corporations Law under which the proposed examinations were authorised is as follows: "596A. 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 or was such an officer during or after the 2 years ending: (i) if the corporation is under administration - on the section 513C day in relation to the administration; or (ii) if the corporation has executed a deed of company arrangement that has not yet terminated - on the section 513C day in relation to the administration that ended when the deed was executed; or (iii) if the corporation is being, or has been, wound up - when the winding up began; or (iv) otherwise - when the application is made." The section appears in div 1 of Pt 5.9. Section 596F provides a power in the court to give directions concerning the matters to be inquired into at an examination, the procedures to be followed, who may be present and so on. Section 597(5B) provides the "Court may put, or allow to be put, to a person being examined such questions about the corporation or any of its examinable affairs as the Court thinks appropriate". In the circumstances of the present proceeding the relevant court for the application of these provisions was the Supreme Court of Western Australia which had ordered the examinations.

Whether "a misuse" For the applicants attention was directed to a number of cases which it is said support the view that use of witness statements in the present circumstances in an examination by liquidators is a permissible use. In this regard principal reliance was placed upon the passage by Lord Diplock in his speech in Home Office v Harman [1983] 1 AC 280 at 302 to the effect that it is the duty of the solicitor of one party to civil litigation, who in the course of discovery in that litigation has obtained possession of copies of documents belonging to the other party to the litigation, to refrain from using the advantage enjoyed by virtue of such possession for some collateral or ulterior purpose of his own "not reasonably necessary for the proper conduct of the action on his client's behalf". Lord Diplock there explained that he used the words "collateral or ulterior purpose" not "in a pejorative sense, but merely to indicate some purpose different from that which was the only reason why, under a procedure designed to achieve justice in civil actions, she was accorded the advantage, which she would not otherwise have had, of having in her possession copies of other peoples' documents." At 304 he said that an order for production of documents to a solicitor on behalf of a party to civil litigation "is made upon the implied undertaking given by the solicitor personally to the court...that he himself would not use or allow the documents or copies of them to be used for any collateral or ulterior purpose of his own, his client or anyone else; and any breach of that implied undertaking is a contempt of court by the solicitor himself". On this latter point see also at 312 and 323 and Crest Homes PLC v Marks [1987] 1 AC 829 at 853‑854. In Esso Australia Resources Ltd v Ploughman (1995) 183 CLR 10 at 32 Mason CJ recognised the implied undertaking, springing from the nature of discovery, by each party not to use any document disclosed for any purpose "otherwise than in relation to the litigation in which it is disclosed", citing Harman. At 33 he said "[n]o doubt the implied obligation must yield to inconsistent statutory provisions and to the requirements of curial process in other litigation, eg discovery and inspection, but that circumstance was not a reason for denying the existence of the implied obligation". See also Computer Technology Pty Ltd v Toshiba Ltd (Australia) Pty Ltd (1994) 53 FCR 125 at 131-133.

On these authorities it was submitted for the applicants it is well established material may be used "for the purposes of the litigation" and that this included the right of a liquidator applicant in the proceeding to examine on materials so becoming available. On the face of matters Carr J was giving directions pursuant to O 10 r 1 of the Federal Court Rules when he made the interlocutory order now the subject of this application and the orders of 11 November 1997. The orders for examination were made in the Supreme Court and, as Carr J noted in his reasons, no question of res judicata, or issue estoppel arose out of the decision of Heenan J because the respondent banks were not party to the proceedings in the Supreme Court. The position is therefore that the proceeding in this Court is a different proceeding to that in the Supreme Court. It would appear to follow that the proceeding in the Supreme Court is a collateral proceeding for the purposes of the application of the principle in Harman so that the leave of this Court would be required pursuant to that principle before the documents could be used in the proposed examinations. As was recognised in Akins v Abigroup Ltd (Supreme Court of NSW, Court of Appeal, unreported, 1 June 1998) in the judgment of Mason P in which the other members of the Court of Appeal agreed, the Harman principle extends to all categories of disclosed documents or things, whether attracting client legal privilege or otherwise: Akins at 21 citing Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 765. It was there also recognised that the protection afforded by Harman is not a fundamental and enduring one because the court may give leave permitting the collateral use of documents subject to an implied Harman undertaking. In our opinion nothing in the reasoning of Carr J denied these principles of law. He expressly recognised the right of the liquidators to proceed with the examination. He was not moved to grant leave pursuant to the Harman principle and so did not address that issue.

Special position of liquidator Then it was submitted for the applicants his Honour was in error in finding possible procedural unfairness because, in enacting s 596A of the Corporations Law, Parliament has evinced the intention of putting liquidators in a special position such that examination by them with knowledge of witness statements would properly be for the purposes of the litigation. This was supported firstly by a reference to the decision of the High Court in Hamilton v Oades (1989) 166 CLR 486 at 497-498: "The cases in which a court has stayed an examination on the grounds now claimed when charges have not been laid are rare. The very purpose of the section is to create a system of discovery, which may cause defences to be disclosed, for the purpose of bringing charges. The section gives to the liquidator rights not possessed by an ordinary litigant: In re John Arnold's Surf Shop Pty Ltd (1979) 23 SASR 222 at 232. In these circumstances it must be accepted that the section applies equally to proceedings which the liquidator "might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought": Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537 at 541; Re Norman Baker Pty Ltd; Ex parte Hillman [1982] WAR 349 at 351-352; (1982) 1 ACLC 79 at 81; 6 ACLR 257 at 259‑260; Re Nalanda Pty Ltd [1983] 1 Qd R 269 at 271. To adopt the language of Kitto J in Mortimer v Brown (1970) 122 CLR 493 at 496, to hold otherwise 'would render the provision relatively valueless in the very cases which call most loudly for investigation' ". There is ample further authority applying the principle that a liquidator, through the power of examination, is in a special position. In Adler v Qintex Group Management Services Pty Ltd (In liq) (1996) 22 ACSR 446 at 448 the special advantage given liquidators not available to ordinary litigants was recognised. It was accepted on the authority of Hamilton v Oades the legislation gives a liquidator rights not possessed by other litigants. Further (at 449) the Court stated that "to deny to liquidators the use of the procedure for examination in litigation would deprive it of most of its practical utility". See also Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 and Douglas‑Brown v Furszer (1994) 11 WAR 400. In Re Excel Finance Corporation Ltd (1994) 52 FCR 69 at 93 this Court accepted "that the use of the power to obtain an examination summons for the principal purpose of furthering the cause of the applicant for the summons or, as in this case, appointor of the applicant in litigation against third parties, not for the benefit of the corporation, its contributories or creditors (other than in the most indirect way) is a use of the power for a purpose foreign to that power and thus an abuse of the power." See also Spedley Securities Ltd (In liq) v Bond Corporation Holdings Ltd (1990) 8 ACLC 367 at 380. Carr J distinguished Hamilton v Oades on the ground the High Court was considering whether Mr Oades was not to be compelled to answer any questions, the answers to which may tend to incriminate him in respect of criminal charges pending. However, the passage in that case cited above is based on civil authorities which are the progenitors of the other authorities to which we have just referred. It is the case that those authorities also establish two associated principles. The first is that a liquidator exercising the power of examination is not entitled to have a dress rehearsal of the cross‑examination in the action. The second is that the liquidator may seek information in connection with proceedings which might be able to be brought, proceedings in contemplation, proceedings decided to be brought and proceedings already brought. Carr J's reasons show him to be alive to these principles of law. In distinguishing Hamilton v Oades, Carr J was addressing a submission that the liquidators could not be deprived of a "right" arising pursuant to s 596A to examine on the witness statements. If in error by distinguishing Hamilton v Oades, Carr J was not in error in the conclusion he reached on that submission. As Akins at 21-22 makes apparent, issues of collateral usage and client legal privilege are not determined by the existence of a power in a liquidator under s 596A. That section does place the liquidator in a special position but the further question is "in relation to what?" The Court is required to separately address both collateral usage and privilege. As the reasons of Carr J make readily apparent, the witness statements were all documents in relation to which a claim of client legal privilege has been made. It is in that context that his findings of misuse and procedural unfairness must be considered and in the context that he was having fundamental regard to maintenance of the trial date. In our view Carr J did not proceed on a mistaken view of the powers of a liquidator in relation to examinations. The issue he was addressing was whether privileged documents should be made available for the purpose of the exercise of those powers. Importantly, none of the authorities establishing the special character of the liquidator's power require documents on which privilege is claimed to be made available for the purpose of the exercise of that power. Client legal privilege For the applicants it is accepted that the witness statements prepared for the litigation were privileged: Akins at 9; State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 54 SASR 224 at 226; Complete Technology at 131. It is also accepted for them that prior to the coming into operation of the Evidence Act the position was that in the case of delivery of witness statements pursuant to an order no waiver of privilege was imputed in consequence of compliance with an order to produce to any greater extent than was necessary to accomplish the purposes of the order and the Practice Note pursuant to which it was made: State Bank of South Australia at 231. The question of imputed waiver of legal professional privilege was considered by the High Court in Goldberg v Ng (1996) 185 CLR 83. The majority (Deane, Dawson and Gaudron JJ) held that, in considering whether there is an imputed waiver of such privilege, the governing consideration is whether fairness requires the privilege should cease irrespective of the intention of the holder of the privilege. In the course of their reasons the majority said at 98: "...we are firmly of the view that where two or more distinct proceedings or procedures are related in the sense that there is general correspondence between the parties and they arise out of the same dispute or closely connected disputes, conduct in relation to one proceeding or procedure, whether anticipated or already commenced, can founder an imputed waiver for the purposes of all proceedings and procedures." The majority upheld the decision of the Court of Appeal that imputed waiver was applicable where a solicitor had voluntarily disclosed privileged documents to a Law Society because ordinary notions of fairness required the party be precluded from then asserting the documents were protected for inspection in a related equity proceedings. This was so even though the solicitor had asserted the continuance of the privilege when disclosing the documents to the Law Society. For the applicants it is contended provision of the witness statements in the principal proceeding must have the consequence it is waived so that the statements are available for the collateral proceeding by way of examination. Questions have recently arisen concerning the impact of the Evidence Act on the common law of waiver of legal professional privilege. In Akins at 12 Mason P, with whom the other members of the Court of Appeal agreed, adopted and followed the reasoning in Telstra Corporation v Australia Media Holdings (No 1) (1997) 41 NSWLR 277 (a decision of McClelland CJ in Eq) and the Full Court of the Federal Court in Adelaide Steamship Co Ltd v Spalvins (1997) 152 ALR 418. The effect of those decisions is that the principles of the Evidence Act touching client legal privilege apply derivatively to ancillary proceedings involving the pre‑trial gathering of evidence and they do so because the common law is modified so as to accord with that Act in this area (Akins at 9). Client legal privilege is addressed in Pt 3.10 and div 1 of the Evidence Act 1995. Apart from the provision in s 118 concerning legal advice, the other principal operative provision is s 119. That provides evidence is not to be adduced if it would result in disclosure of a confidential communication between the client and another person or the contents of a confidential document which were made or prepared for the dominant purpose of the client being provided with professional legal services. There is no argument the witness statements in issue here were confidential communications or confidential documents as that term is defined in s 117(1). Section 122 addresses the circumstances in which there can be a loss of client legal privilege. In subs 122(2) it is provided, subject to sub-s(5) - which has no relevant exclusionary effect here - the division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made "...(c) under compulsion of law". In Akins at 25 Mason P, with whom the other members of the Court of Appeal agreed, held any disclosure by delivery of copies of statements pursuant to the Practice Direction there referred to was "under compulsion of law" within s 122(2)(c). The consequence is that it was held client legal privilege would not be lost in that circumstance. There seems no material distinction, nor was one contended for, between the provision of witness statements pursuant to a practice note or pursuant to a direction of the court. This was also the position reached by the Court of Appeal had it been necessary for it to decide the case on common law principles (at 29). The application of the Evidence Act must be considered with regard to the provision in s 8(3) that it has effect "subject to the Corporations Law and the ASC Law". While that must be borne in mind no consequence of that provision was argued before us. The position would therefore appear to be that if Carr J had maintained his orders of 11 November 1997 for production so there was a compelled exchange of witness statements representing the knowing and voluntary disclosure of a privileged communication, such disclosure would be under compulsion of law and would not constitute a waiver of privilege (at 29): Akins. There would not therefore be conduct to which the principle in Goldberg v Ng could apply. However, as it is unnecessary for us to finally decide those points, as they do not relate to anything done by Carr J, we indicate that as our provisional opinion in response to the submissions made to us. These submissions have been addressed because they were made for the applicants. They do not relate to what actually occurred before Carr J. The privileged character of the witness statements clearly weighed heavily with him. He was entitled to act under O 10 r 1 of the Federal Court Rules in the interests of the trial of which he had the conduct and the privilege claim to be resolved at trial. In our view his orders of 28 May 1998 were not made in error. In so concluding we do not consider whether in exercising the power pursuant to O 10 r 1 it would be open to a court to waive client legal privilege. Nor do we act on the basis that the claim for such privilege will necessarily be sustained in relation to all documents (the list referred to in par 15 being in issue in this regard). Conclusion It seems that his Honour would have had firmly in mind that examinations by the liquidators were imminent. In making his nunc pro tunc order, the subject of this application, his Honour obviously sought to make unnecessary any argument regarding what use could be made of the documents which his order would otherwise have brought into being and to obviate the risk of prejudice to the orderly conduct of the trial to take place before him. It was not his Honour's purpose to make orders with enduring discriminatory effect upon one of the parties. Necessarily he would have envisaged that there would be a variation to the nunc pro tunc order upon the examinations having taken place or other changed facts. An application for variation of the order was clearly contemplated. There is evidence of changed facts in that the examinations did not proceed. The appropriate course is for the applicants to re-apply for variation to the order and/or other new orders. For these reasons we consider leave to appeal should be granted but the appeal be dismissed. (B) INTERLOCUTORY ORDER OF 24 JUNE 1998 This is an application by the applicants in the matter for leave to appeal from a further interlocutory judgment by his Honour made on 24 June 1998. Again, the submissions on the application for leave and on the appeal were heard concurrently. On 28 May 1998 the applicants, by motion, sought an order that the dates of trial in this matter, fixed for three months from 3 August 1998, be vacated and that the trial commence on 16 February 1999. The motion came on for hearing on 16 and 17 June 1998 and involved affidavits of great length. When we say "of great length" we refer to affidavits and annexed materials in excess of 5,000 pages. The motion was another link in a chain of interlocutory applications that had been brought before his Honour over a period of two years. As his Honour said:

"About two years ago a series of interlocutory motions started surfacing. At each directions hearing there would be a flurry. The pattern was a flurry of motions from both sides. Complex interlocutory motions were put forward, voluminous affidavit evidence filed in support of those complex motions and then as a general pattern most of the complex issues raised by those motions fell away, but there were still substantive procedural matters to be dealt with." His Honour delivered ex tempore reasons on 18 June 1998. Orders pursuant to those reasons were made on 24 June 1998. The date of commencement of the trial was altered from 3 August 1998 to 1 September 1998 but otherwise that part of the motion which sought vacation of trial dates was dismissed. It can be seen from the foregoing that this litigation has been a fiercely contested proceeding. It is also litigation in respect of which there is substantial public interest. The applicants comprise companies which were part of a group of companies known as the Bell Group and the liquidators of those companies now in liquidation. The principal company in the Bell Group was a public company the operation of which prior to liquidation is a matter of public interest. The respondents are national and international banks which provided finance to the Bell Group. The applicants claim from the respondents a sum of $282M which it is said is the advantage the respondents obtained as a result of knowing participation in breaches of fiduciary duty by directors of the applicant companies and by voidable transactions between the companies and the respondents involving preferences to the respondents over other creditors. The relevant events relied upon in the statement of claim took place between January and July 1990. Liquidators were appointed to the relevant applicant companies between 1991 and 1993. In April 1995 the liquidators received funding and indemnities from creditors enabling them to start examination of the affairs of the companies. The claim against the respondents was filed in this Court in December 1995. In 1996 the liquidators obtained orders for the formal examinations of bank officers and others to assist them to gain knowledge of relevant matters in the litigation. In November 1997 his Honour made a comprehensive set of directions setting a timetable under which the parties were to exchange, inter alia, witness statements and expert reports in preparation of the matter for trial. It was part of those directions that the trial commence on 3 August 1998. The applicants now say that their case will not be ready for trial by August 1998 and seek an order that the trial be postponed until the new year. The applicants' motion to his Honour was based on two grounds. First, that the anticipation of the parties that preparation of the matter for trial could be completed by 3 August 1998 when the direction was made by his Honour in November 1997 that the trial commence on that date, had not been realized, at least as far as the applicants were concerned, and significant areas of preparation remained to be completed. Second, since the dates for trial had been fixed the respondents had obtained leave to amend their defence and cross-claim to introduce substantial new issues ("the par 13A amendments"). Those issues could not be prepared for trial by 3 August 1998. The par 13A amendments had raised questions as to further discovery of documents and the provision of particulars and the time spent in pursuit of those issues had compounded the applicants' difficulties in preparing the case for trial generally. The respondents did not contest that the issues introduced by the par 13A amendments could not be prepared for trial by the applicants by 3 August 1998 and conceded that some months would be required by the applicants for that purpose. The respondents submitted to his Honour, however, that the general issue as to which the amendments related, namely, whether the loans made between Bell Group companies were subordinated to the financial arrangements made between the companies and the respondents, had been an issue in the proceeding when it was commenced by the applicants and the applicants should be able to start their case on the date set for trial. His Honour sought to steer a middle course by delaying the start of the trial to 1 September 1998 and by relieving the applicants of the obligation to present any evidence going to issues raised by the par 13A amendments. His Honour said: "The applicants will be granted, to the fullest extent, indulgence if they have difficulties of proof, but they must by now have accumulated a very considerable volume of documentation and other evidence in admissible form. They must have, on frequent occasions, obtained opinions from counsel, and that must have been on the basis of admissible evidence. So the obligation will be on them to move forward and put that evidence in. ... If the applicants reach a stage where they, subject to the 13A matters, consider they would like to call upon the respondents to present their case then I have in mind that the respondents will be obliged to do that. ... There would then inevitably, it seems to me, have to be a further adjournment so that the parties can prepare in relation to the additional 13A matters. I respectfully disagreee with Mr Zelestis when he says that would work an injustice to his clients. I do not think it will. I think we shall see a momentum picked up as this case gets under way which will carry through. There may well be a very substantial adjournment at the break of the first initial stages but that will be in the interests of justice so that the applicants' concerns can be adjusted. It may not be perfect justice that results from the orders which I foreshadow but, in the circumstances of this very unusual case and bearing in mind the adjustments and indulgences to which I have just referred, I think it will be as close as humanly possible to the attainment of that end." Before turning to the applicants' arguments in support of the application for leave to appeal it is necessary to expand upon the nature of the par 13A amendments. The amendments to the defence added more than thirty pages to the pleading which now exceeds 100 pages in length. The statement of claim is slightly less. Particulars of the amended defence were still being sought and supplied in May 1998. The applicants have not yet filed an amended reply and defence to the cross-claim in response to the par 13A amendments. The fresh issues raised by the par 13A amendments go to the conduct of the companies and their officers in the period 1985 to 1987, well before the period that is relevant to the applicants' statement of claim. Such issues present particular problems for the applicants' liquidators. The liquidators will face significant difficulties in making enquiries and obtaining statements to ascertain the response to be made to the amended defence. If the respondents succeed on the par 13A amendments the applicants' case will, in effect, be nullified. Importantly, the liquidators will have to gather relevant material, instruct their solicitors and obtain advice on how the applicants prospects are affected by the amended defence. Liquidators are singularly disadvantaged in these circumstances. They do not possess the knowledge of the corporations they are liquidating and depend upon such assistance as they may obtain from persons who were directors, officers or executives of the corporation at relevant times. The applicants submit that the issue raised by the application for leave is of sufficient importance to warrant the grant of leave, in particular, it is said that the decision is attended by sufficient doubt and substantial injustice would result if the decision were not set aside. (See: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399; Australian Securities Commission v Somerville (1994) 51 FCR 38 at 44-45.) The respondents submitted that the decision was the exercise of a discretion in respect of a matter of practice and not substantive rights and above all it remained an order capable of variation or revocation upon application to his Honour. It is well settled that appeals from interlocutory orders on matters of practice or procedure will not be entertained unless there is substantial cause to do so. (See: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177.) In our opinion there were two matters that required particular consideration when the motion was determined.

First, did the circumstances of this case warrant a special order requiring the applicants to present their case before the issues between the parties had been settled by pleadings and before the applicants had appropriate opportunity to prepare the case they would have to present on those pleadings? Second, did the liquidators have sufficient opportunity to gather material on the issues raised in the amended defence on which advice could be obtained as to risks faced by the liquidators in the litigation? His Honour formed the opinion that sufficient work had been done to allow the litigation to commence after which further preparation of the case may gather momentum from the fact that litigation was underway and, in any event, the prospect of the grant of lengthy adjournments would protect the applicants against the prospect of injustice. Of course, it was important that in November 1997, if the parties held any doubt as to whether the date for the trial of the matter could be fixed for August 1998, those doubts should have been put to his Honour. To vacate trial dates set well in advance for a trial of considerable length requires unusual circumstances and will be a rare event. His Honour had that consideration well in mind and thought postponement of the commencement of the trial to be the appropriate compromise. In our opinion, however, in the particular circumstances of this case, such a determination did not give adequate weight to the two considerations we have mentioned. First, by requiring the applicants to commence their case when it was conceded they were not ready there followed a real risk that the applicants would start and finish their case affected by that disadvantage. There is no question in this case of the applicants being the authors of their own misfortune having had ample time to prepare their case and failing to do so. It is a complex matter in which the applicants do not have knowledge of the picture to be presented until the pieces of the jigsaw are gathered and fitted. The statement of claim was filed in its final amended form was filed in October 1997. The amended defence including the par 13A amendments was filed on 30 January 1998. Although there is substantial public interest in litigation being prosecuted and decided promptly there is also a significant public interest in the issues in this matter being properly ventilated and argued. Second, his Honour did not advert to the particular disadvantage under which the liquidators operated. They had to be given sufficient time to obtain assistance from persons who had been directors, officers or executives of the companies between 1985 and 1987 to gain knowledge of the operation of the companies in that period and to obtain advice on the material so gathered. If the applicants were obliged to commence the trial without that material and that advice, not only was it likely that the conduct of the applicants' case would be prejudiced it would also follow that the applicants would be denied the opportunity to assess whether their case had been put at greater risk of defeat by reason of the amended defence. The liquidators liability to costs may also have to be considered, particularly if indemnification of the costs of the liquidators only extended to litigation conducted on legal advice. To be required to proceed to trial without opportunity to deal with those matters would visit an injustice on the applicants that could not be removed by any indulgence granted by the Court. Therefore, we conclude that there has been an error of principle in his Honour's decision not to vacate the dates of trial and leave to appeal should be granted, the appeal allowed and the decision set aside. Normally, the motion would be remitted to his Honour for further consideration but for several reasons it is appropriate that this Court obviate further use of resources in argument of that issue and make an order that appears to be appropriate on the material before us. First, as noted earlier it is agreed that the applicants will need some months to instruct their solicitors in respect of the amended defence. It is to be noted that under s 596A of the Corporations Law liquidators do not obtain the right to examine persons who were officers of a corporation more than two years prior to a date of liquidation. Second, the pleadings will have to be finalized and materials arising therefrom discovered and inspected and some time will be required to complete those steps. Third, the liquidators will have to determine whether they will proceed with examinations of officers under the Corporations Law or apply to his Honour to reinstate previous reciprocal orders requiring the respondents to provide witness statements and expert reports to be relied upon in their case. A new timetable will have to be set if such an application were made. In all these circumstances we consider that the appropriate order is that the trial dates be vacated and the trial be fixed to commence not before 1 February 1999. The fixing of actual trial dates will be a direction to be made by his Honour. As to the costs of the application and appeals, each party has succeeded, in our view, in equal measure and it is appropriate that each party bear its own costs. I certify that this and the preceding twenty (20) pages are a true copy of the Reasons for Judgment herein of the Court.

Counsel for the Applicants: D F Jackson QC with CB Edmonds

Solicitor for the Applicants: Blake Dawson Waldron

Counsel for the Respondents: T Jucovic QC with J Allsop SC and M C Goldblatt

Solicitor for the Respondents: Freehill Hollingdale & Page

Evidence Act 1995(Cth)ss 117(1), 118, 119, 122, 122(2)(c), 122(5)

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