In the matter of Affinity Capital Pty Ltd - Indrasith v Ku & ors [2011] NSWSC 1158 | Case summary

Judgment 1HER HONOUR : For hearing before me on 23 September 2011 were applications brought by each of the first, third, fourth and fifth defendants (Messrs Ku, Chan, Mah and Chin) each seeking orders to set aside an examination summons (and notice to produce) served on him pursuant to orders obtained ex parte on 21 July 2011 from the Registrar pursuant to s 596B of the Corporations Act 2001 (Cth). The summonses relate to the examination of these individuals about the examinable affairs of Affinity Capital Pty Ltd (In Liquidation). In the event that the summonses (or any of them) are not set aside, the applicants seek an order in the Court's discretion, limiting the matters for examination. 2The uncommon feature of the present proceedings is that the examinations (scheduled for 29 September 2011) are to be conducted by a creditor of Affinity Capital (not its liquidator), Dr Leslie Indrasith, who was authorised by ASIC to make the application to do so (and hence is an eligible applicant for the purposes of the definition in s 9 of the Corporations Act ). 3The applications to discharge the respective summonses are based on the same grounds: first, that the examinations are for an improper purpose (being in order to secure a forensic advantage to Dr Indrasith, a creditor of the company, that would not be available to him if the company were not in liquidation); second, that there had been non-disclosure of material matters in the application to ASIC for approval of Dr Indrasith's application to be approved as an eligible applicant to conduct the examinations and in the s 596C affidavits put before the Registrar; and, third, that one or more of the examinees is not a person who is in a position to give evidence as to the examinable affairs of the corporation in question. The applications to set aside the Orders for Production turn on the broad range of documents specified (as going beyond what would be reasonably necessary if the examinations were for a proper purpose) and further that the orders are oppressive having regard to the imprecision with which some of the categories are framed. Background Facts 4According to the Report to Creditors in November 2008 by the then administrator and now liquidator (Mr Gavin Moss), Affinity Capital was a company primarily involved in the property development and finance business. It conducted its business within what Mr Moss described loosely as "a "group" of (mainly) related Companies". Mr Moss reported that Affinity Capital acted as the trustee for the Affinity Capital Trust and the Affinity Group Trust (and his report referred collectively to the company and the trusts of which it was trustee, and the creditors of each). 5Mr Moss noted that Affinity Capital was the trading entity for the "group" under which the staff were employed; provided services to the property development companies; acted as a lender and facilitated seed money to get property development off the ground; and was responsible for all marketing and sales for the "group". He says that it was the "trading entity for the 'group'". According to the report, the "group" raised funds by issuing preference shares in the two public companies within the 'group' (Affinity Alliance Fund Ltd and Acuity Property Fund Ltd, each of which was placed in liquidation on 10 October 2008, at the time that Mr Moss was appointed as administrator to Affinity Capital). Mr Moss is the liquidator of the two public companies and a number (but not all) of other companies within the 'group'. 6Affinity Capital commenced operations in March 2003. At that time, its directors were Messrs Chek, Chen and Ku (and I would infer from the corporate entities noted as shareholders, that the directors had an interest through companies with which they were associated in the shareholding of Affinity Capital - Fidell Investments, for example, being a 'personal entity' of which Mr Chen is a director and which holds shares in Affinity Capital). (It appears that neither Mr Mah nor Mr Chin was ever appointed a director of Affinity Capital, although they were each directors of a number of other entities in the so-called 'group'.) The directorship of the company changed in June 2006 when Messrs Chen and Ku ceased to be directors, leaving Mr Chek as sole director. Mr Ku was later re-appointed as a director in August 2008 shortly before the company was placed in administration. I consider the respective roles the defendants played in Affinity Capital or the 'group' later in the context of the issue as to whether they are persons who may have information as to the examinable affairs of the company. 7Mr Moss has reported that the assets of Affinity Capital are mainly loans to other companies and 5 properties located in New South Wales (over which mortgages are held by financiers). The company's assets are secured by fixed and floating charges held by the two public companies. The secured creditors have a claim against the company in the order of about $1.8m. Ordinary unsecured creditors are owed an estimated $14.45m of which an estimated $11.85m is owed to 82 individual investors. Dr Indrasith is a creditor of Affinity Capital in respect of an advance (which he denied was a loan) to the company in the order of $400,000. 8Affinity Capital was placed in administration on 10 October 2008, with Mr Moss being appointed as administrator. A first meeting of creditors was held on 21 October 2008 and a committee of creditors was formed. That committee included Dr Indrasith and Mr Chek. Mr Moss reported to creditors on 7 November 2008 (from which I have drawn much of the summary as to the operation of the company and the 'group'). 9Prior to the second creditors' meeting, a document headed "Outline of Proposed Deed of Company Arrangement by Directors" was forwarded to Mr Moss on 7 November 2008 by Mr Chen (and copied by Mr Chen by email to each of the remaining defendants in these proceedings). It set out a proposal for a deed of company arrangement for Affinity Capital (described in the header of the document) as trustee for Affinity Capital Trust and Affinity Capital Group. In broad terms, it proposed that there be a Deed Fund sourced from the profits anticipated as arising over a period of 5 years under a proposed profit-sharing agreement with a potential (unidentified) purchaser of land in Queensland which was owned by a related company (Anna Bay Pty Ltd). Mr Moss considered that the potential of the deal eventuating was low, if at all. His recommendation to creditors was that, given the uncertainty of the deed, it would be in their interests for the company to be wound up. 10The deed proposal is of significance on the present application, however, because it was signed "for and on behalf of the 'DIRECTORS'" by Mr Chen and, under his signature, were the names of all five of the present defendants (though only Mr Chen had signed the document). The document made various references to the directors throughout its terms. (Mr Chen, in cross-examination, explained the reason for the preparation of this document by him as being that he was the one who knew the detail of the proposed project development being put forward as the source of the funds for the deed.) 11In the email with which the details for the proposed draft were forwarded to Mr Moss and copied to the remaining defendants, Mr Chen outlined the proposed deed arrangement and noted that the proposal to be put forward by the directors was that creditors of Affinity Capital were to receive 46% of the profit from the Qld development project with the remainder to be divided proportionately to the creditors of other named Affinity entities in liquidation (Affinity Alliance Fund, Acuity Property Fund, CK Finance & Investments and Mortgage Fund (Aust)). (Of those entities, I note that Mr Chin accepted that he was a director of the Affinity Alliance Fund and the Acuity Property Fund but said that he really only dealt with those funds and his role was only on the project development side, not the capital raising side.) Each of Mr Ku, Mr Mah and Mr Chin agreed in cross-examination that he had, or it was likely that he had, received the email with the attached outline and that he had not raised any objection to the putting of the proposal to the administrator under his name. (Mr Mah suggested that this was akin to "putting his hand up" to say that he was linked with the other companies). 12Four of the five defendants (not including Mr Mah) had earlier signed a letter in October 2008 (not on letterhead) to Dr Indrasith (and similar letters I understand were sent to all of the Affinity Capital or Affinity 'group' creditors) informing him of the financial position of the company and of the steps they had taken in that regard (thus suggesting that each of those 4 defendants had played a role in the company or the group akin to that of a director - there being, for example, no obvious reason why a project development manager, as Mr Chen and Mr Chin both portrayed themselves, with no more general corporate role would be corresponding with creditors in this fashion). It was, however, suggested that each of the four defendants had signed the letter because one or other of them would have been personally known to the investors (a number of whom were family members or relatives or otherwise associated with one or more of the defendants), presumably in an attempt to lend some credence or provide some comfort for the assurances made therein. 13As noted above, Mr Moss recommended that the company be wound up and that was ultimately the resolution of creditors at the second creditors' meeting on 5 December 2008. Mr Gavin Moss was appointed the liquidator of Affinity Capital. 14Mr Moss has not been placed in funds so as to enable any further investigations by him as liquidator pursuant to s 596A of the Corporations Act . In the witness box he said that he had received cooperation from all parties involved in the matter and responses as to all his queries. He accepted that he had received information to enable him to comply with his tasks both as administrator and as liquidator (although he was unable to say whether he had received all relevant information and said he had been limited by the funds he had). Relevantly, when considering the Orders for Production, he believed he had substantially all the books and records of the company and had all the records relating to the inter-company loans. (Indeed, in Mr Moss' last circular to creditors dated 6 August 2010, Mr Moss advised that he was ready to proceed to de-register the company and to resign as liquidator.) He has, however, consented to Dr Indrasith conducting the examinations in the latter's name (though, as pointed out on the present application, such consent is not necessary) and says that (although he does not think he thought much about it at the time that the proceedings in contemplation by Dr Indrasith were proceedings for breach of the Corporations Act that a liquidator might take against a director or shadow director. His recollection was that there had been discussions both as to what options for recovery he might take as a liquidator and that there was mention of the possibility that Dr Indrasith might have his own claim against the directors or de facto directors independently (as to which he advised him to obtain his own independent advice). 15Relevantly, in the letter seeking Mr Moss' confirmation that he did not object to the application by Dr Indrasith for the issue of examination summonses (a draft of which was sent on 6 December 2010 and the final version on 10 December 2010), Dr Indrasith's lawyers included the following statement: Such summons [i.e. the examination summons] will allow for cross-examination of the directors and shadow directors to take place prior to the commencement of any proceedings for damages by our client. 16In his affidavit sworn 19 September 2011 in these proceedings, Mr Moss deposes that if he receives further evidence from the examination summons proceedings that the directors of the company breached the Act then he would consider whether to instigate court proceedings against the directors on behalf of the company as liquidator "in the normal manner again subject to funding from creditors or from ASIC" ([9]). He deposed that the examination summons filed by Dr Indrasith "is generally of the type that I would initiate in this matter, subject to instructions from and funding by creditors" although he would seek leave from the court to examine defendants who were not directors of the company ([8]).) 17Dr Indrasith was granted funding by Legal Aid NSW to undertake an examination of persons relating to the examinable affairs of Affinity Capital, such a grant of aid in a civil matter being described by Dr Indrasith's lawyers in the letter to ASIC as "rather uncommon" (although curiously it was submitted in Court by those lawyers that this was not by any means uncommon). Whatever be the position in that regard, it was submitted by Mr Sachs, and I accept, that it is mere speculation as to the basis on which Legal Aid has agreed to provide funding (in the absence of any evidence on that point) and hence it does not seem to have any bearing on whether the main purpose of the proposed examinations is in aid of a private proceeding or a proceeding on a cause of action available to the company or the liquidator. 18Following communications between Dr Indrasith's legal representatives and ASIC in December 2010 and February 2011, Dr Indrasith's lawyers wrote to ASIC by letter dated 25 February 2011 requesting ASIC's permission for him to make application for examination of the 5 individuals named therein (the present defendants) as to the examinable affairs of the company. By letter dated 29 April 2011, ASIC notified its authorisation of Dr Indrasith to make applications under Division 1 of Part 5.9 of the Act in relation to Affinity Capital. 19In the letter to ASIC, the objectives of the proposed examination orders were identified as being: (a) to enable evidence and information to be obtained to support the bringing of proceedings against examinable officers in connection with the examinable affairs of the Company; (b) to assist in identifying the Company's assets and liabilities; and (c) to protect the interests of the Company's creditors. 20The letter to ASIC also referred to the results of the liquidator's initial investigations into the assets and liabilities of the company and the reference made to the potential recoveries available to the liquidator such as insolvent trading actions against the directors (for which the liquidator had unsuccessfully sought funding from creditors). The letter submitted that the draft affidavit of Dr Indrasith and other enclosures provided to ASIC provided initial evidence: ... that the directors and shadow directors have been in breach of the requirements for a Financial Services Licence under Corporations Act 2001 Part 7.2 . Whilst a number of other provisions may also have been breached by the directors and shadow directors the most likely breaches include misleading and deceptive conduct under Australian Consumer Law 2010 s18 and trading whilst insolvent under Corporations Act 2001 s588G . 21Dr Indrasith has sworn three affidavits in these proceedings (the first two, of 16 May and 24 June 2011, respectively, having been sworn in support of the application for the issue of the examination summonses; the last, sworn 20 September 2011, having been sworn in response to the application for those summonses to be set aside). (The s 596C affidavits were tendered in these proceedings by Dr Indrasith as evidence of what was communicated to the Registrar.) In his first two affidavits (copies of which were served on the defendants, notwithstanding that there was no obligation to do so, having regard to s 596C of the Act), Dr Indrasith set out the circumstances of his investment in Affinity Capital with detail of the representations made to him at the time. The objectives of the examinations for which he sought the issue of the summonses were only referred to in general terms. No particular cause of action the company might have against the defendants was identified. Dr Indrasith's 20 September affidavit deposes to the meetings he has had with other creditors and the steps taken by him in discussions with other creditors to obtain support for potential investigation of actions in order to recover back the monies invested in Affinity Capital. Dr Indrasith denies that the predominant reason for initiating the proceedings is to obtain monetary compensation for himself. He maintains that his intention is "to identify some avenues for all the creditors of the Company to obtain compensation for their losses, including myself". Those avenues, he says, include the identification of potential breaches of the Corporations Act . 22Before turning to the issues for determination, I note that the parties have approached the hearing of the defendants' applications on the basis that this is not a hearing de novo but, rather, a review of the Registrar's decision to issue the examination summonses (referring to O 'Brien v Wily [2009] NSWSC 946; (2009) 74 ASCR 145 at [29]). (Though there is an argument that such an approach is incorrect, as was articulated before me and summarised in In the matter of Idoport Pty Ltd (in liq) (recs apptd) [2011] NSWSC 322, that is a matter that will be determined, if at all, in another forum. For completeness, however, I note that in Meteyard & Ors v Love & Ors [2005] NSWCA 444 , Basten JA, having noted that the Court was exercising federal jurisdiction vested in it pursuant to s 77(iii) of the Constitution in the exercise of the power to issue an examination summons and that the issue of the summonses had occurred by way of an ex parte application on the basis of an affidavit the terms of which had not been disclosed and were not then before the court, observed (at [32]) that "the nature of a proceeding to discharge an ex parte order may be treated as, in substance, a rehearing of the initial application", referring to Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (1993) 61 SASR 557 at [561].) 23Notwithstanding that these applications are put on the basis that this is a review not a rehearing, the Court is not restricted to the material that was before the Registrar ( Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61 ; O'Brien v Wily at [26]), though regard is of course to be had to the basis on which the Registrar's decision was made. It has nevertheless been said that the discretion to review such additional material should be exercised 'sparingly' so as to facilitate the review process, not to turn it into a fresh hearing ( Lawteal Pty Ltd v Ofo [2005] NSWSC 984 ). 24Further, it follows from this not being a hearing de novo that the onus is upon the defendants (as the persons seeking to set aside the examination summonses and notices to produce). In Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 (at [19]), it was said that the Court should exercise restraint before moving too freely to stay or set aside proceedings. Issues 25The following issues therefore arise for determination on the present applications: (i) Is the use of the examination summons procedure in this case an abuse of process, as being for a predominant purpose which is improper? (ii) Was there a material non-disclosure to the Registrar (and/or ASIC) and, if so, should the Court exercise discretion to set aside the examination summonses and orders for production? (iii) Are the prospective examinees persons who may have information or knowledge of the examinable affairs of Affinity Capital so as to make them amenable to orders for their examination? (iv) If the examination summonses (or any of them) are not set aside, should the orders for production nevertheless be set aside or limited? Summary 26For the reasons set out below, I am of the view that the examination summonses and orders for production served on Andrew Mah and Michael Chin should be set aside but that the applications by Daniel Ku and Adrian Chen to set aside the examination summonses issued to them should be dismissed. I nevertheless consider that the examinations that do proceed should be restricted to matters relevant to the potential claims against the individuals as directors or shadow directors of Affinity Capital for insolvent trading (or other claims under Part 5.7B of the Corporations Act ) or for breaches of their duties as directors to Affinity Capital (including any claims in relation a breach of the provisions of the Corporations Act relating to the holding of an Australian Financial Services Licence). 27What I consider would not be a proper use of the examination summons process (and hence the area in which examination should not be permitted) would be cross-examination of the defendants as to matters relating to allegations of misleading and deceptive conduct in relation to the circumstances in which Dr Indrasith invested moneys with Affinity Capital - that being of relevance only to a personal claim Dr Indrasith might have against the directors (or the company) and not a claim that the company or the liquidator might be in a position to pursue against the defendants. 28I also consider that the orders for production are too broad and not confined to matters relating to examination that is permissible. I will therefore set those aside other than in relation to specified categories of documents. (i) Has the examination summons procedure been invoked for a proper purpose? 29At the outset, I note that in Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 (at p 496) Mason CJ identified two important public purposes that the examination process was designed to serve: "One is to enable the liquidator to gather information which will assist him in the winding up; that involves protecting the interests of creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connection with the company's affairs". 30The use of the process to enable a decision as to whether to commence subsequent proceedings (not confined to criminal proceedings) has been recognised in various cases as proper. Thus, in Re Hugh J Roberts Pty Ltd (In Liq) [1970] 2 NSWLR 582 (at p 585) Street J, as his Honour then was, said: A liquidator needs information concerning his company just as much in connection with current or contemplated litigation as in connection with other aspects of his affairs. In using the statutory machinery or private examination he will in many cases be gathering evidence as an ordinary and legitimate use of this procedure. Those conversant with advising liquidators on contemplated litigation customarily observe the ritual of warning the liquidator not to commence such proceedings until all the necessary private examinations have been held...I see no reason in principle to justify liquidators being thus placed in a position of having almost, as it were, to dissemble regarding their future intentions lest the Court deny them the right to use statutory machinery of the private examination. 31Counsel for Dr Indrasith (Mr Carter), referred in this context to the comments made in Re BPTC Ltd (1992) 7 ASCR 291 (at [292]) by McLelland J (as his Honour then was), on an application under s 387 of the Companies (NSW) Code for inspection of the books of the company: I was referred to the decision of the English Court of Appeal in R e North Brazilian Sugar Factories [[1887] 37 Ch D 83] in which consideration was given obiter) to an equivalent provision, s 156 of the Companies Act 1862 (UK). There is a statement in that case to the effect that the obtaining of evidence in support of actions by individual shareholders against the directors of a company in the course of being wound up necessarily lies outside the proper ambit of the section. In my opinion such a limited view cannot be regarded as acceptable to the present day. Facilitation of the accountability to individual creditors or contributories, as well as to the company itself, of those who participates in the conduct of its affairs prior to the winding up should nowadays be regarded as sufficiently related to the winding up to fall within the scope of the section. (my emphasis) 32Waddell CJ in Eq in Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513 (at [517] - [518]) cited with approval both Re BPTC and Hamilton v Oades ; his Honour's decision in turn being cited with approval in O 'Brien v Wily and Re Clutha Ltd [2000] NSWSC 647; (2000) 34 ACSR 685 ). 33There is no doubt that it is a proper purpose of a liquidator's examination to seek further information both in relation to current proceedings already on foot ( Hong Kong Bank of Australia v Murphy (1992) 8 ACSR 736 per Gleeson CJ at [743]; Re Interchase Corporation Ltd (In Liq) 20 ACSR 600 per Kiefel J at p 604) and in relation to proceedings which are only then contemplated ( Australian Securities and Investments Commission v Karl Suleman Enterprises Pty Ltd (in liq) [2003] NSWSC 163; (2003) 44 ACSR 694 per Austin J at [698] - [699]). One of the (proper) purposes of such an examination is to enable an assessment to be made of the prospects of success of a contemplated proceeding or to determine whether or not a proposed defendant may have assets available to meet any subsequent order in proceedings (as to the latter see Morton v Joynson [1999] FCA 530; (1999) 31 ACSR 76 per Weinberg J at [87]). 34The suggestion that Dr Indrasith may obtain a forensic advantage not otherwise available in proceedings instituted by him in a personal capacity raises issues akin to those considered in Re Mendarma Pty Ltd (in liq) [2006] NSWSC 1306; (2006) 24 ACLC 1611 , where it was submitted that the issue of the summonses in that case had been sought for the improper purpose of conducting a dress rehearsal of cross-examination of the applicants either in existing proceedings or in the proceedings which the liquidator had already flagged he was contemplating bringing. White J considered the question of when a 'dress rehearsal' may amount to an improper purpose in those circumstances and referred to the summary of principles by Lander J in Re New Tel Limited (In Liquidation); Evans v Wainter Pty Ltd (2005) 221 ALR 331; 54 ACSR 284 (at [252]). 35White J considered that the evidence in the case before him did not support the submission that the liquidator's purpose, let alone his dominant purpose, was the improper one of conducting a dress rehearsal of cross-examination of the applicants, noting that "Such a conclusion would not be drawn merely from the fact that proceedings are pending, let alone from the fact that proceedings are contemplated against the examinees". His Honour did, however, note the caution expressed in Hong Kong Bank v Murphy by Gleeson CJ (at [518] - [519]) that "the fact that current proceedings are pending makes it necessary for the court to be alert to the possibility that a proposed application might be used for an improper purpose." 36It is submitted, relying on Worthley v England; Re Excel Finance Corporation Ltd (1994) 14 ACSR 407, that this is in effect a private interest being pursued (namely, a personal damages claim against the directors or shadow directors) and thus not in the interests of the corporation, its contributories and creditors. In Excel ( at p 92), the distinction between the pursuit of private interests and interests for the benefit of those contemplated in the section was discussed: Subsequently Waddell CJ in Eq in Re Laurie Cottier Productions Pty Ltd (In liq) (1992) 9 ASCR 513 referred with approval to the comments of McLelland J in Re BPTC (supra). Again the context of the comments of Waddell CJ in Eq was very different to the present case. That was a case of an examination being conducted by a liquidator who was funded by a substantial creditor. The creditor had threatened proceedings against the examinee. The examinee was a director of the company in liquidation and the allegation was that he was a party as a director to incurring the creditor's debt when there were no reasonable grounds to expect that the company would be able to pay all its debts as and when they became due. It was, as his Honour observed necessary to distinguish, on the one hand, between the purpose of the creditor in funding the examination, its motives being to advance its own interests, and the purpose of the liquidator in conducting the examination, on the other. There was nothing to suggest that the liquidator was seeking to conduct the examination in the interests of the creditor funding the investigation rather than in the interests of other creditors or for the purpose of finding out the circumstances which led the company into its financial difficulties. As his Honour said, that was sufficient to dispose of the application to set aside the examination order. (my emphasis) 37In Re Hugh J Roberts at [585], Street J, as his Honour then was, having urged liquidators not to be shy in using a private examination for the legitimate purpose of gathering in information, went on to give as examples where there would be an abuse of process in this context, those where litigation was either contemplated or commenced and there was an attempt to summon the prospective or existing defendant's probable witnesses and examine them simply for the purpose of destroying their credit. In Excel , the Court noted that another (related) case of abuse would be the conduct of an examination to enable a "dress rehearsal of the cross-examination" to be instituted of a trial impending or contemplated and gave as other examples of a situation where the use of the examination process would be to obtain a forensic advantage in litigation as being the use of an examination summons to obtain de facto discovery where a discovery order had been refused in proceedings already on foot. In Excel , the Court said "It is neither possible nor desirable to catalogue all the circumstances where use of an examination summons might constitute an abuse of process", noting that whether there will, in a particular case, be a use of the process or an abuse of it will depend upon purpose rather than result. 38Relevantly, in Excel , the Court noted that: The fact that the trial has commenced, or is contemplated, may throw light upon the purpose. But merely because other proceedings had been commenced or are contemplated would not involve, of itself, an abuse of process. This follows having regard to the nature of the investigative process which could throw light on the question, inter alia, whether there was evidence which would warrant a liquidator, for example, proceeding against an examinee. But it may be quite a different question where proceedings contemplated or instituted are not proceedings to be brought by the company, but proceedings brought by some other party for the advantage of that party rather than the company. For example, it would be an abuse of process for a creditor approved by the Commission for the purposes of s 597(1) to obtain an examination summons to conduct an examination for the purpose of obtaining evidence in proceedings which the creditor proposed to bring against the examinee for defamation. That would be a purpose completely foreign to the power of examination which is ultimately in aid of the company itself and not the personal advantage of the person seeking to conduct the examination . (my emphasis) 39At ([90] - [91]), his Honour noted: The Australian jurisprudence eschews the English distinction in favour of the more useful test of whether the person seeking the examination order has the purpose of obtaining a forensic advantage not otherwise available: see per Gleeson CJ in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 519. However, as Gleeson CJ also points out: ... the possibility that a forensic advantage will be gained does not mean that a making of an order will not advance a purpose intended to be secured by the legislation. (my emphasis) 40The purpose in question must be the predominant purpose: It is apparent that the question whether there is, in a particular case, an abuse of process will be a question which will depend upon the purpose of the applicant seeking the order of the court and the circumstances of the case. For an abuse to be found it will be necessary that the offensive purpose be, at the least, the predominant purpose: see Burns Philp & Co Ltd v Murphy (supra) at 732 and Williams v Spautz (supra) at 529. ( Excel [89]) 41In a case where the liquidator is conducting examinations funded by a creditor then the distinction to be drawn is between the purpose of the creditor funding the examination, its motives being to advance it own interests, and the purpose of the liquidator in conducting the examination on the other. Where it is the creditor conducting (albeit through legal representatives) the examination such a distinction becomes meaningless. The purposes of the creditor and the person conducting the examination are one and the same and the question must be what is the predominant purpose (if there be more than one). 42Cases in which it is suggested that a creditor's personal interest in the conduct of examinations may render the use of the examination process improper have generally arisen in the context where a creditor is funding the liquidator to conduct the examinations. That of itself does not render use of the examination process improper, as was recognised in Re Laurie Cottier and in Re Clutha , where Young J, as his Honour then was, said at [9]: There was some material put before me that if the liquidator had to pay for the examination out of his own pocket or from the pockets of the unsecured creditors, he might not proceed with the examination. However, because he has been funded, he intends to do so. That said, somehow or the other, to be improper of unwise. That is really a tangential issue in the case before me. In any event the point was decided adversely to the plaintiff in Re Laurie Cottier 43As Mr Carter notes, in O'Brien v Wily , after considering Re Clutha, Re Laurie Cottier and Fetzer v Irving [2005] SASC 53; (2005) 52 ACSR 354 , Barrett J said at [41]: It is clear from the cases mentioned that a purpose of gathering information properly required by a party deciding whether to fund litigation to be pursued by the liquidator for the benefit of the liquidator for the benefit of creditors is not of itself an improper purpose. It is a purpose clearly and sufficiently related to the due performance of the liquidator's functions. 44The position of a creditor in conducting examinations of this kind is somewhat more problematic. The capacity of a creditor to conduct an examination was recognised by Lander J in New Tel (at [252]), at propositions 9 and 10 in his Honour's summary of the relevant principles in relation to improper purpose in the context of other proceedings that the liquidator has brought or is contemplating bringing: 4. If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside. 5. The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside. 6. The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the court to summon a person for examination while litigation is pending against that person or entities connected with that person. 7. The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant's purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose. 8. It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors. 9. A creditor may, if first authorised by ASIC, apply to the court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole. 10. A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration. (my emphasis) 45This summary of principle has been approved in O'Brien v Wily and Mendarma . 46Mr Sachs submits, in effect, that proposition 10 is enlivened in the present case because (if Affinity Capital were not in liquidation), Dr Indrasith would not have been able to obtain an order to examine the defendants (although it is conceded that he may have been able to obtain an order for preliminary discovery). 47Pausing there, the same might of course be said of any creditor invoking the examination process - since, in the absence of the liquidation of the company in question, any litigant in a personal capacity is not able to make use of the compulsory processes available to liquidators under s 596A of the Corporations Act and would thus be restricted to the avenues otherwise available by use of the preliminary discovery process or the like. If the import of proposition 10 is to limit a creditor to processes that would in any event be available to the creditor by way of preliminary discovery or the like, then there seems little purpose in the recognition that a creditor may seek to avail itself of the statutory examination process. 48It seems to me that what is contemplated in this regard is that the creditor cannot use the procedure in order to obtain a forensic advantage in private or personal litigation that the creditor might seek to bring outside of the liquidation (as opposed to seeking to use the procedure in order to obtain evidence or information of the kind that the liquidator, in whose shoes the creditor might be said in effect to be standing at least for the purposes of the present examinations, might use to consider what causes of action would be available to the company in liquidation). If so understood, then it would follow on naturally from proposition 9, being the requirement that such examination be in the interests of the corporation or its creditors as a whole. 49It has been recognised that an important purpose of the examination process is to benefit "the corporation, its contributories or its creditors" ( New Tel at [143] citing Re Excel at [89]-[93]). It is thus permissible that an examination can incidentally benefit a creditor or some other person who is involved in actual or contemplated litigation against the company or its directors or officers. There is no reason to limit this to the situation where the incidental benefit arises only where the liquidator conducts the examinations. 50Whether an examination can be said to be an abuse of process if there is a real commercial possibility that an examination has as its object the benefiting of a particular creditor who is engaged in or contemplating litigation against the company or its directors or officers is subject to divergent views. One view is that it is not a proper use of the examination process for a liquidator or other eligible applicant to conduct examinations with the aim of assisting particular creditors in pursuing their own interests ( Re GPI Leisure Corporation Ltd (in liq) (1994) 15 ACSR 282 at [290] - [291] ; Southern Cross Petroleum Sales (SA) Pty Ltd (in liq) v Hirsch (1998) 70 SASR 527). On the other hand, it has been held that it is not an abuse of process for a liquidator or other eligible applicant to conduct an examination simply because this may operate to the benefit of a particular creditor ( Re BPTC Ltd ; Re Laurie Cottier ; Douglas-Brown (Official liquidator of Woomera Holdings Pty Ltd) v Furzer (1994) 13 ACSR 184 ). 51The prevailing authority appears to be that there is to be a differentiation between examinations conducted for the benefit of the creditors generally and examinations conducted by an individual creditor for its benefit alone - at least in circumstances where there are actual or proposed proceedings by that individual creditor. 52It is suggested that if creditors are able to benefit directly from an examination (by gaining information that will assist them in pursuing private litigation) then this will be regarded as giving them an unfair advantage (even when it is a liquidator conducting the examination). The question, where a liquidator is conducting the examinations, is whether he or she is acting in the public interest or for the benefit of the creditors as a whole rather than on behalf of the private interests of those creditors ( Bell Group Ltd (in liq) v Westpac Banking Corporation [1998] FCA 849; (1998) 28 ACSR 343 at [349]). 53Nevertheless, in New Tel, the Full Court of the Federal Court, dismissing an appeal against orders under ss 596A and 596B obtained by a creditor who had been authorised by ASIC to examine certain people associated with a company in liquidation, considered that the conduct of the examinations by the creditor would not be an abuse of process and that the company and other creditors stood to benefit from the examinations (both because they would provide information that may also assist the liquidator and because other creditors would receive proportionally more if the creditor recovered damages from the director, solicitor and firm). (There, the creditor had commenced proceedings against the director, the company's solicitor and the solicitor's firm seeking compensation for loss claimed to have been suffered as a result of alleged misleading and deceptive conduct and had also lodged a proof of debt in the liquidation for $60 million for misleading and deceptive conduct under ss 1041H and 1041I of the Act.) It was said that the fact that the creditor "would obtain a significant advantage which would not have been available to [it] if [the company] had not gone into liquidation ... does not mean its application for these orders amounts to an abuse of process" ( New Tel at [260] - [261]). 54In Sandurst Trustees Ltd v Harvey [2004] SASC 157; (2004) 88 SASR 519 , the Full Court of the South Australian Supreme Court considered that trustees for holders of convertible notes in a company in liquidation who had been authorised by ASIC could properly obtain examination orders under s 596B against employees of the company's former accountants, whom the trustee had sued for breach of duty of care and misleading and deceptive conduct. The Full Court considered that it was proper for the trustee in performance of its statutory and other duties as trustee to seek, by examination, "information" that "should enable [the trustee] to advise the noteholders whether [the trustee] should proceed with its action as it is, reshape it or abandon it, or ... recommend that the noteholders bring their own action against [the accountants] or take other action to protect their investment" ( Sandurst v Harvey at [57]). 55Further, in New Zealand Steel (Aust) Pty Ltd v Burton (1994) 13 ACSR 610, the Supreme Court of Victoria allowed a creditor who had been authorised by ASIC to apply for an examination of officers of a company that was in receivership and against whom the creditor was bringing proceedings for insolvent trading. 56The authors of McPherson's Law of Company Liquidation consider at [15.730] that it is questionable whether an individual creditor should be so privileged as to be able to conduct examinations in circumstances where there are actual or proposed proceedings against the company or its directors by the creditor (citing Parker, 'Liquidator's Examinations' (1993) 10 Australian Bar Review 25 at [53] - [54]), expressing the view that "...the examination process is to enable liquidators to become more conversant with the affairs of the company - it is not designed to enable particular creditors to position themselves better in relation to litigation that they wish to pursue on their own behalf against officers and associates of companies in liquidation." However, it is there noted it is common for the examination process to be used as an opportunity to ascertain whether actions lie or should be pursued against directors or officers. 57Mr Sachs submits that Dr Indrasith is seeking to use the examination process for the predominantly improper purpose of advancing his own interests as a creditor by seeking to obtain information in relation to his own potential claim for damages either against the company itself or against the examinees or others. 58In this regard, he points to the s 596C affidavits sworn by Dr Indrasith which it is submitted (with some force in my view), read as a whole, deal predominantly with allegations about the circumstances in which Dr Indrasith advanced $400,000 to Affinity Capital. Dr Indrasith alleges that this amount was advanced or invested without receiving a prospectus (or deed) and having been misled and deceived by the defendants. In the witness box, however, Dr Indrasith was adamant that he was taking the present course of action as a matter of fairness and justice and stressed more than once the complaint that Affinity Capital had sought funds without an Australian Financial Services Licence. 59(I note that Part 7.6 of the Corporations Act requires a person who carries on a financial services business in Australia to obtain an Australian Financial Services Licence (s 911A). The term "financial services business" is defined in s 761A as "a business of providing financial services". The term "financial service" is defined in s 766A as providing financial product advice (see s 766B); dealing in a financial product or making a market for a financial product (see ss 766C-766D); operating a registered scheme (see s 766D); providing a custodial or depository service (see s 766E) or engaging in conduct of a kind prescribed by regulations. It has been held that the licensing regime secures adequacy of capitalisation of providers of financial services, excludes unqualified an untrained persons from the industry and enforces compliance with ethical standards ( Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822). A contravention of this section is a criminal offence punishable by a fine of up to 200 penalty units and/or imprisonment of up to 2 years for individuals (Item 262C of Schedule 3 and s 1311) and 1,000 penalty units for a body corporate (s 1312). A defence of reasonable mistake of fact may be available in respect of a contravention of s 911A where the licensee was reasonably mistaken as to the grant, renewal or subsistence of the licence ( Von Lieven v Stewart; Kemish v Godfrey (1990) 21 NSWLR 52; 3 ACSR 118 at [130]). (For cases in which orders have been made against entities that carried out unlicensed financial services businesses, see, for example, Australian Securities and Investments Commission v McDougall [2006] FCA 427; (2006) 57 ACSR 175 and Australian Securities and Investments Commission v IPLUS Risk Management Pty Ltd [2006] FCA 583.) To the extent that investigation is sought to be carried out as to the circumstances in which the company may have carried on business without a licence that it was required to hold, this would be a matter clearly within the public interest so as to support the use of the examination process.) 60It seems to me that the high point of the defendants' application arises from the statement in the December 2010 letters prepared by Dr Indrasith's legal representatives (for the purpose of seeking confirmation that Mr Moss did not object to the invocation of the examination procedure) that the examination summons would allow the cross-examination of the directors and shadow directors to take place prior to the commencement of "any proceedings for damages by our client". In that letter there was reference to discussion that had apparently taken place as to "the appropriate avenues for initiating proceedings against the directors and shadow directors of the Company on behalf of our client". 61It seems to me that the reference to the commencement of "any proceedings for damages by our client" is most likely to be read as a reference to proceedings to be brought privately by Dr Indrasith for causes of action available to him personally (as opposed to proceedings that might be brought by the liquidator or in the name of the company in order to recover on causes of action that might be available to the company itself). I say 'most likely' because it is possible that what was envisaged was an application by Dr Indrasith to seek leave to bring proceedings in the company's name to pursue causes of action available to the company by way of a derivative suit - but nowhere has that been articulated. 62Read with the emphasis in Dr Indrasith's earlier affidavits to the representations said to have been made to him in order to procure his investment in the company, it seems that what Dr Indrasith (or at least his advisers) had in mind at that time was the commencement of proceedings for misleading and deceptive conduct at least against the individuals with whom he had dealt in November 2007 when he advanced moneys to the company (and perhaps against the company itself, although the latter seems unlikely given its financial position). By contrast, the causes of action that might be available to the company (say for breach of directors' duties) or the liquidator (say for insolvent trading), while they might produce a recovery in which secured and unsecured creditors might share (and hence by which Dr Indrasith might recoup some or all of the moneys he had advanced to Affinity Capital) would not be causes of action that in the ordinary course a creditor would have standing to bring. 63However, I am not satisfied that it would be correct to infer that the bringing of a private action was something intended at the time (as opposed to a possibility in the minds of those advising Dr Indrasith), particularly since Dr Indrasith is not in a position to fund such proceedings. Therefore, while I consider that the use of the examination procedure was intended to ascertain what causes of action might be available by which Dr Indrasith (and other creditors) might be in a position to recoup the investment made in Affinity Capital, I am not persuaded that the predominant purpose of the examinations is to garner evidence for intended proceedings in a personal capacity intended to be brought outside the liquidation. 64That said, it is the blurring between a personal suit for damages by Dr Indrasith (seemingly in the contemplation at least of his legal advisers at the relevant time) and a cause of action maintainable by the company or its liquidator (both of which might lie against the directors and shadow directors of the company but which are very different causes of action) that has caused me concern on the present application. That blurring was, with respect, evident not only in the December correspondence (and one might think in the focus of much of the material included in the s 596C affidavits) but also in some of the cross-examination and submissions made for Dr Indrasith on the present application. 65If the predominant purpose of Dr Indrasith in seeking the issue of the examination summonses was to pursue a personal claim (against the company or its directors) as opposed to facilitating the gathering of information in order to enable a claim to be brought in the name of the company or its liquidator in an attempt to pursue recovery for all creditors (from which Dr Indrasith would or may indirectly benefit), then I am of the view that there would be no doubt on the authorities that this would be an improper purpose and the examination summonses should be set aside. If the predominant purpose is the latter, then the fact that Dr Indrasith may obtain a collateral advantage in obtaining information that he could potentially use in a personal proceeding against the directors would not render use of the examination summons procedure an abuse of process. 66The material submitted to ASIC and to the Registrar is consistent with there being both purposes underlying the proposed use of the examinations procedure. As noted above, I am not convinced that it can be said that the predominant purpose was one that was improper. In this regard, the authorities recognise that the onus of establishing improper purpose in this area is a heavy one (see Mendarma ). 67On balance, I am not persuaded that Dr Indrasith's predominant purpose at the time of the making of the application to the Registrar and now is an improper one (though I have not reached that conclusion without some hesitation bearing in mind the need for caution when reviewing the evidence in circumstances where a private action seems clearly to have been contemplated - as made clear in Hong Kong Bank v Murphy ). Nevertheless, the fact that Dr Indrasith has been at pains to seek support from creditors for the proceedings (and in the witness box confirmed that any decision in relation to future action was one that would be referred back to the other creditors) lends credence to the proposition that the examination summons procedure has been invoked in an attempt to call the directors to account for their perceived failures as directors, for the benefit of creditors as a whole. (My impression of Dr Indrasith's evidence in the witness box, non-responsive as it often was to the questions that were put to him, was that it was redolent of a crusader's zeal in seeing justice done as a matter of principle and in the public interest, rather than his primary motivation being the pursuit of an individual complaint in his personal capacity. Mr Sachs submits that bare assertions by Dr Indrasith that the examination will be conducted for the benefit of the liquidator and other creditors should not be given any weight. I accept that the protestations by Dr Indrasith do not rise above assertions as to his subjective intent but I formed the view that he was genuine in his complaint as to the manner in which the defendants (as directors or, if they so be, as shadow directors) had carried on the business of the company to the detriment of a broad number of investors, not just himself. Furthermore, as noted above, the steps Dr Indrasith has taken (and is contemplating) in terms of obtaining creditor support to the bringing of the proceedings and any further proceedings reinforces the conclusion that the purpose of the examinations is to facilitate the recovery of funds by the company for the benefit of creditors as a whole (not to facilitate a private action by Dr Indrasith).) 68Mr Carter notes, and I accept, that the onus of satisfying a court that there is an abuse of process lies on the party alleging it and the onus is a heavy one. The permissible purposes for the conduct of examinations include the determination as to whether proceedings are sufficiently meritorious to warrant them being commenced or continued and their likely prospects of success; to demonstrate the viability of a proposed proceeding; and to gather information to assist in the administration or winding up of a corporation. I am satisfied that the predominant purposes of Dr Indrasith in the present case fall within the former of these purposes. 69Reviewing the material that was before the Registrar, and taking into account the material now before the Court as to the notification to creditors generally of the proposed application, I am not satisfied that the defendants have established on the balance of probabilities that the predominant motivation underlying the forthcoming examinations is an improper one. That said, given the blurring of the line between the respective causes of action during the course of the hearing before me, I think it necessary that there be clear limits set on the examination process, as outlined later in these reasons. 70Therefore, I do not consider that the basis has been established for all of the examination summonses to be set aside but I have concerns that some of the issues upon which Dr Indrasith has focussed (having regard to his affidavits and to some of the cross-examination of the defendants on the application before me) would not be permissible areas for examination if that were the sole purpose of the examinations (namely, questions as to the representations made to induce Dr Indrasith to invest his funds in the company). While caution should be exercised in seeking to determine this in advance of the examinations (as pointed to in Meteyard ), I consider that it is appropriate to place some limitation on the examinations in circumstances where it is the creditor (with a personal interest in obtaining information relevant to a potential claim of his own) who has the conduct of the examinations. (ii) Failure to disclose material matter 71Mr Sachs submits that a further reason that the examination summonses should be discharged is that Dr Indrasith did not disclose in his s 596C affidavits (or in his application to ASIC) that he was considering making a personal claim for damages (against Affinity Capital or the defendants). It is submitted that this was a material matter to disclose in the circumstances and that it goes to the exercise of the Court's discretion to set aside the summonses. (It is further submitted that ASIC may not have authorised Dr Indrasith to make the application if it had been advised of his true or other motive, i.e. to examine the defendants for the purposes of a personal claim against them). 72In Mendarma (at [45]) White J noted that in Re Southern Equities Corporation Ltd (in liq); Bond & Caboche v England (1997) 25 ACSR 394 Lander J, with whom Cox and Bleby JJ agreed, had said (at 422-423) that as an application for an examination summons is made ex parte , "there is a heavy obligation upon the person applying for the examination summons to make full and frank disclosure of all matters which may impact upon the decision to summon a person for examination about a corporations examinable affairs". 73His Honour further noted that Lander J in Southern Equities had gone on to say that: The obligation is to provide to the court all material which might impact upon the order sought, including all material which might lead the court to refuse the application. The applicant must act in the place of the proposed examinee and therefore draw to the attention of the court anything which might lead the court to refuse the application. 74In Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1998) 20 FCR 540 at [543], the court said (of the duty of full disclosure in ex parte applications): The rationale behind the principle is clear; it is of the utmost importance in the due administration of law that the Courts and the public are able to have confidence that an ex parte order has been made only after the party obtaining it has complied with its duty to disclose all relevant facts. 75The duty of disclosure in general terms is such that even if something has been forgotten a failure to disclose it may be sufficient to lead to the order being set aside (see Clifton v Robinson (1853) 16 Beav 355; 51 ER 816) . 76Mr Sachs submits that the non-disclosure of the intention to bring a personal claim is a material non-disclosure and cannot be described as an 'error of judgment', adopting the terms used in Mendarma . Of course, the existence of a personal claim (or motivation to bring a personal claim) is likely to be the case whenever a creditor is prepared to fund (or, in Dr Indrasith's case, pursue the funding) of investigation into the failure of the company and the possible causes of action available to a liquidator that would be of benefit or potential benefit to unsecured creditors in general. Hence, a personal interest in the outcome of the investigations would not of itself be unusual and arguably would not warrant specific disclosure. In any event, Dr Indrasith's supporting affidavit made it very clear that he had a personal interest (and potential personal claim) against the directors and/or the company for misleading and deceptive conduct. Similarly, on the material before the Registrar, it is clear not only that the liquidator had raised the possibility of potential breach of the requirement for a prospectus in relation to the financial investments (and the possibility of insolvent trading claims had been raised) but also that Dr Indrasith was raising allegations that would support a personal claim for misleading and deceptive conduct against those with whom he dealt at the time of the investment. 77What was not disclosed (assuming that there was such an intention at the time as opposed to recognition that there was a possibility of such further proceedings) was an intention to bring proceedings for such a claim after the investigations (a matter referred to in Dr Indrasith's solicitors' correspondence in December 2010). There is in my mind a real doubt as to whether there was a formulated intention at the relevant time so as to require disclosure on the making of the application for the examination summons. 78For the reasons set out earlier, I do not think there was such an intent and therefore the assumption on which the non-disclosure complaint is made has not been made out. Had I been satisfied that there was such an intention then I would have accepted that its non-disclosure was material, having regard to the emphasis placed in the authorities on the need for caution in assessing the purpose of examination summonses where there is a contemplation of proceedings against the examinees. 79The non-disclosure must be material but it does not follow that this should be tested by asking whether the disclosure of the information would have made a difference to the Registrar's decision. In Mendarma at [58] White J said : In my view, the non-disclosures I have referred to were material to the decision of the Registrar to summons the applicants for examination. The matters may have affected that decision. It does not follow that the summonses should necessarily be set aside. However, as Lander J said in Re Southern Equities Corporation, in the passage I have quoted, the Court regards a breach of the obligation to make full disclosure seriously. There is no basis to infer in this case that the non-disclosure came about through an error of judgment as to the materiality of the matters not disclosed. Nor am I in a position to decide whether, had those matters been disclosed, the decision would have been the same. Whether, on a fresh application, either the Registrar or a Judge would make an order for the issue of a summons could well depend upon the further enquiries to which I have referred. Of course, the discharge of the examination summonses is not a bar to the liquidators' applying afresh on an affidavit which makes full disclosure of all material matters. (my emphasis) 80It is submitted by Mr Sachs that had disclosure been made to ASIC of an intent later to pursue private proceedings against the directors or the company, ASIC would not have granted authorisation to bring the application for the orders in the first place. Apart from the fact that it is by no means clear that Dr Indrasith does presently intend to bring private proceedings in the future (and may well not have the funds to permit him to do so), the material to ASIC did reveal at least that as a creditor there were issues of misleading and deceptive conduct which were being raised by Dr Indrasith (and which might therefore have formed the basis of a personal claim by him). 81I am not in a position to determine what ASIC is likely to have done had the position been as Mr Sachs has postulated. The list of persons who may be authorised by ASIC under paragraph (e) to make an application as an 'eligible applicant' is not limited. Authorisations by ASIC to the persons in a variety of capacities have been sanctioned by the courts, including a privately appointed receiver and manager ( Boys v Quigley (as receiver and manager of Geneva Finance Limited) [2002] WASCA 99; (2002) 41 ACSR 499 ); trustees of a unit trust ( Hong Kong v Murphy at [518] - [519]); and a regulatory authority ( Queensland Building Services Authority v ASC (1997) 15 ACLC 398). 82The considerations relevant to a grant of authorisation by ASIC and the types of persons who might be authorised have been outlined along the following lines: The Commission, in determining whether to grant authorisation will consider the relationship which the person seeking authorisation has to the relevant corporation and the external management of that corporation which is in progress. Contributories and creditors would normally have the appropriate connection with the corporation ... although other factors relevant to a particular case may make the authorisation of such persons inappropriate. A receiver and manager might, as is conceded by the appellant also in an appropriate case, be authorised, that is to say given standing to apply to the court ... ( Re Excel Finance Corp Limited; Worthley v England (1994) 52 FCRC 69 at [84]). 83Certainly, ASIC's attention had been drawn in the February 2011 letter to the need to be satisfied that the examinations were for a proper purpose (reference having been made to Re Excel ), therefore it might be thought that ASIC was already alive to the possibility without the need for further disclosure. 84Accepting for present purposes that, had there been an actual intention to commence personal proceedings against the directors after the hearing of the examinations, this would have been a material non-disclosure (which is not what I have found), what would then have been the consequence? 85Notwithstanding the concern of the Courts to ensure that, in the proper administration of justice, there is full disclosure on ex parte applications, in New Tel , when considering the consequence of non-disclosure in the context of the issue of an examination summons, Lander J noted that it did not follow that an order would necessarily be set aside if all material facts had not been disclosed in the supporting affidavit. His Honour said (at [424]): It cannot be said that an order obtained in circumstances where there has been a failure to disclose material facts must necessarily be set aside. Whether or not the order ought to be set aside for failing to disclose material facts will depend upon the facts not disclosed and the circumstances in which the non disclosure came about. An error of judgment in failing to disclose a fact which later becomes material may not necessarily lead to the setting aside of the order previously obtained. So also an innocent non-disclosure may not necessarily require the setting aside of the order for the examination. On every occasion where there has been a non-disclosure and an order obtained it will be a matter of inquiry as to whether or not that non disclosure should lead to the setting aside of the order. However, even if the order is set aside that is no bar to an application for a further order. 86Although I accept that the evidence raises an inference that a motivating factor (as at December 2010) was the personal cause of action, I am not satisfied that it is the predominant motivating factor in the context of the present application. It seems to me clear from Dr Indrasith's cross-examination that he is on what might be described as a crusade for truth and justice, well beyond a desire to recoup his personal losses from the investment. Therefore, it seems to me that the fact that focus was not placed on the possibility of personal proceedings may well have been because there was no firm decision as to the course to be followed after the examinations - bringing the case within the realms of an error of judgment. 87Further, the fact that ASIC had approved Dr Indrasith as an eligible applicant (even though it was aware that he was a creditor) was a matter that the Registrar could in my view properly take into account (balancing the prospect of potential action by the creditor in a personal capacity in the future) as indicating that the regulatory authority had considered that there was a proper basis for the creditor to take such action. 88Had I accepted that there was a material non-disclosure of the kind contended for by the defendants, I would in the exercise of discretion have addressed whether the appropriate course was to set aside the examination summonses altogether or (as I consider in this case is the more appropriate course) would be to address the potential for the examinations to stray into the area of impermissible purpose is to limit the areas for examination (noting as I do the caution in Meteyard in that regard). 89Examination as to the issue of trading without an Australian Financial Services Licence (or without having issued a prospectus) or as to insolvent trading or other claims that might lie by the company against its directors or shadow directors seems to me to be permissible and in the interests of the potential for some recovery by all creditors (as well as in the public interest of ensuring that companies of this kind comply with any applicable statutory requirements when seeking investment of funds from the public). (What should not in my view be permitted is examination as to the circumstances in which Dr Indrasith advanced moneys to Affinity Capital and which may give rise to a personal claim for misleading and deceptive conduct against the company or one or more of its directors or shadow directors.) 90I note in this regard that it has been said that the possibility of recoveries for insolvent trading or otherwise in a winding up should not be lightly overlooked ( Young (as representative for the Australian partnership known as Accenture) v Sherman [2002] NSWCA 281; (2002) 170 FLR 86 at [91] per Davies AJA) and (albeit in the context of an administration - where creditors will have to make a decision as to a company's future - that as a matter of public policy) that creditors are entitled to a proper investigation of such matters notwithstanding the practical constraints faced by an administrator ( Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 156 FLR 453 at [101] and [126]). Further, in circumstances where the liquidator is without funds, and the conduct of examinations at all is only possible under the grant of legal aid, it may be an exercise in futility if the approach were to be (as is the position where ex parte orders are set aside for non-disclosure but the same relief may again be sought once full disclosure is made) that the examination summonses be set aside with it being left to Dr Indrasith to make a fresh application for summonses to be issued. 91While the interest of creditors in an insolvency has been recognized in general to be a monetary one (in Alternative Business Solutions Deputy Commissioner of Taxation v Alternative Business Solutions (Aust) Pty Ltd (in admin) [2006] FCA 400, Lindgren J referring to the expression "interests of creditors" in the context of a winding up application as the creditors' interests in recovering what is owed to them), there has been increasing recognition of the public interest in the discharge of their duty to act in good faith and in the interests of the company, particularly where the company is nearing insolvency (see Ford's Principles of Corporations Law at [8.100]; The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 70 ACSR 1 per Owen J at [4384] - [4450] where a duty to creditors when a company is nearing insolvency was discussed; and New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler (1994) 122 ALR 531 , where Gummow J stated that where a company is insolvent or nearing insolvency, "there is a duty of imperfect obligation owed to creditors, one which creditors cannot enforce save to the extent that the company acts on its own motion or through a liquidator". 92Finally, I note that in Southern Cross Petroleum Sales (SA) Pty Ltd (in liq) v Hirsch (1998) 70 SASR 527, Lander J at 536, considering the exercise of the discretion to issue an examination order, noted that the court may have regard to a number of matters (including the seriousness of the matters into which enquiry is to be made; the use to which the information obtained on the examination might be put; the possibility of an advantage to the eligible applicant which he or she would not otherwise enjoy and the concomitant disadvantage to the prospective examinee; the availability of the information from other sources; the cost to the prospective examinee in attending for examination; whether the information sought is so peripheral to make the attendance of the prospective examinees oppressive; and the wider public interest in investigating the affairs of the corporation - at 536-537). Those factors, in the present case, would in my view tend towards an exercise of discretion in favour of permitting the examinations to proceed (albeit in a confined scope), as does the statutory imperative to have regard to the just, quick and cheap disposition of the real issues in the case. It seems to me that a fresh application making clear Dr Indrasith's current position (if that were earlier not clear) would simply lead to orders again being made at least in relation to Mr Ku and Mr Chen). ( iii) Are the proposed examinees persons who are amenable to orders for examination? 93Mr Sachs notes that the Court must be satisfied that the defendants have "taken part or been concerned in examinable affairs of the corporation and [have] been, or may have been, guilty of misconduct in relation to the [Company]" or "may be able to give information about examinable affairs of the corporation" (although for the purposes of a review of the Registrar's decision, the onus lies on the defendants to establish that they do not fall within that characterisation). 94Basten JA in paragraphs [39] to [43] of Meteyard said: A consideration of the terms of s 596B(1)(b)(ii) suggests that the scope of the power is delimited by four considerations, namely that: (a) the proposed examinee may have "information" to give; (b) the information must be relevant in the sense that it is about "examinable affairs of the corporation"; (c) because the purpose of the section is to allow the receivers and managers to be informed of facts about the affairs of the company, the information should be information not within their knowledge, although the extent of knowledge will not be precisely definable, and (2005) 65 NSWLR 36 at 47 (d) there must be a factual basis for the Court to form a reasonable state of satisfaction that a proposed examinee may have relevant information . (my emphasis) 95The definition of 'examinable affairs' in s 9 of the Corporations Act is broad. In Meteyard at [45], Santow JA said: Insofar as the scope of the power depends upon whether the enquiry is directed to the 'examinable affairs' of the corporation, I would emphasise the need for caution in any a priori observations seeking to limit the scope of that very broadly defined expression. 96In Meteyard , a distinction as to the position of "connected entities" was considered, noting the reference made in the definition of "examinable affairs" in s 9 of the Corporations Act to the affairs of a connected entity of the corporation. Basten JA noted that: Whilst, as noted above, there is considerable overlap between par (a) and par (b) of that definition, par (c) identifies a separate class of factors. The definition of "connected entity" in s 9 picks up the concept of a related body corporate as defined in s 50 and a connected entity as defined in s 64B. One aspect of the definition of a connected entity is a body corporate over which the corporation can exercise control or material influence: another is a body corporate which is indebted to the corporation: s 64B(1)(a) and s 64B(1)(f). In relation to such bodies, the business affairs of the body can be examined if they are or appear to be "relevant to" the corporation or the corporation's examinable affairs. (my emphasis). 97On the evidence before the Registrar it seems to me that there was a proper basis for him to conclude that all 5 of the defendants may have been involved in the business affairs of Affinity Capital or to have had knowledge of those affairs (although what has emerged on the application before me suggests that the position of Mr Chin and Mr Mah is that they are unlikely to have had information as to the examinable affairs of Affinity Capital). 98Mr Ku and Mr Chen seem to me clearly to be persons who may have information as to the examinable affairs of the company. Both were involved in the establishment of its operations in 2003. Both were directors up until mid June 2006 (and continued thereafter to be involved with the group but each resigned at directors at that time for reasons in effect put as focussing on the property development role or the up front role on the projects). Mr Ku resumed as a director in late 2008 because he felt a responsibility to his former director (Mr Chek) to do so. Mr Chen took a lead role in formulating the proposed deed to be put to creditors. The suggestion that Mr Chen was no more than an employee reporting to the general manager (Mr Appleby) seems inconsistent with this interest in the company generally but in any event does not mean that he would have no knowledge of the company's affairs. (It seems from the focus of their affidavits that Mr Ku and Mr Chen may take the view that because they were not directors at the time of Dr Indrasith's investment in Affinity Capital, their evidence is not of relevance for the purposes of the forthcoming examinations. However, when the issue is as to the conduct of the company's affairs from the perspective of claims that may be available to the liquidator, the fact that they may not have dealt with Dr Indrasith in November 2007 seems to me to be immaterial.) 99I have no doubt that Mr Ku and Mr Chen are persons who may have information as to the examinable affairs of the company and properly amenable to orders of the kind that have been made. They were both directors at various times in the company's history. Mr Ku and Mr Chek seem to have been the principal decision makers. Mr Chen, though his evidence was that he was only involved in relation to property development and even then was only reporting to someone else in the company, was nevertheless a director when the company commenced its property development business (apparently ceased to be a director in order to have a better record when applying for loans in other entities) and was still sufficiently involved in the company or the group and its affairs as to be instrumental in formulating or proposing the proposed deed of company arrangement. 100The position of Mr Mah and Mr Chin is different. Neither was a director of the company (although they were directors of others in the 'group'). Mr Mah was the human resources manager of Affinity Capital. Mr Chin was involved in property development. Mr Mah resigned in June 2008. Both deny having any books or records relating to the company (and the liquidator has raised no complaint in that regard). I am not satisfied that in their positions within the group (or in Mr Mah's case within Affinity Capital) were such as to mean that they are likely to have information as to the matters the subject of the examinations (within the scope of the permitted examinations). True it is that they were associated with companies in the 'group' that dealt with Affinity Capital and might in that capacity be able to give information as to Affinity Capital's dealings with other companies in the 'group'. However, neither was in a role relating to the financial funding of the property developments and neither has access to the books and records of Affinity Capital (or, I would infer, the balance of the companies now in liquidation - the records of which Mr Moss says are with him). 101It seems to me that the basis on which the examination orders were sought against Messrs Mah and Chin was no higher than that they had been included by Mr Chen on the outline proposal to the administrator, although neither had signed it or commented to the administrator in relation to it (and, in the case of Mr Chin only, he had signed the letter to Mr Indrasith) and that they had been identified by Dr Indrasith (though each denies any such involvement) as having put the investment proposal to him in the first place (the latter going only to a personal claim not a company cause of action). 102I therefore consider that the examination summonses and orders for production addressed to Mr Chin and Mr Mah should be set aside. (iv) Production of Documents 103An order for production for the purposes of an examination under s 596A or s 596B of the Corporations Act may be issued provided that the order is for the purposes of a particular examination and the court is satisfied that there is sufficient connection between the production of the documents sought in the order and the particular examination (per Onefone Australia Pty Limited v One Tel Limited [2007] NSWSC 1188). 104An order for production of documents not required for the purposes and within the scope of the examination is oppressive and in excess of the liquidator's power and can be set aside on that basis ( Re Southland Coal Pty Ltd (rec and mgrs apptd) (in liq) [2006] NSWSC 184; (2006) 58 ACSR 113). 105Here, it is submitted by Mr Sachs that the schedule of documents in respect of each of the examinees (the contents in substance being identical) includes categories that go well beyond the scope of the matters that can legitimately be examined by a creditor. It is said that most, if not all, of the categories are irrelevant to an examination as to the examinable affairs of the company. 106Further, complaint is made as to the vague and indeterminate description of various of the categories of documents, for example the categories baldly stated as "Banking figures", "Sales figures", or "details of secured creditors"; or "All documents relevant to or touching upon the Company's indebtedness". 107Turning to the particular paragraphs of the notices, I comment as follows:

In the matter of Affinity Capital Pty Ltd - Indrasith v Ku & ors

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