Should Manassen be joined?
34 Manassen submitted that as a creditor and an "interested person" it had the requisite status to bring an application under r 2.13(1) and (3) of the Corporations Rules. As a creditor, Manassen is concerned in the efficient administration of the liquidation. Manassen further contends that it has an interest in the proceedings because a key focus of the work to be undertaken by the proposed SPL includes conducting investigations into the Manassen Security Agreements and the public examination of persons including Manassen's officers and advisers. Manassen submitted that where it is intended for the SPL to investigate aspects of the Manassen Security Arrangements, Manassen has an interest in the proceedings and for that reason ought to be permitted to be heard in opposition to the application. It was asserted that Manassen's interests are directly affected by the proceedings and the proposed application. Finally, it was submitted that unless Manassen is joined, there would be, in effect a lack of a contradictor, particularly in respect of the issue concerning the relationship between this proceeding and the NSWSC Proceedings and the circumstances relating to Manassen Security Arrangements. In this way, Manassen submitted that notwithstanding that the relief sought is not relief against Manassen, Manassen's participation in the proceedings in that sense is necessary. Manassen's submissions did not make reference to r 9.05 of the Rules in this respect.
35 The plaintiff opposed Manassen's joinder submitting that it is not necessary for the proper determination of the issues arising in respect of the application for the appointment of a SPL. The plaintiff submitted that the application does not concern any immediate right or interest unique to Manassen that arises for final determination in the present proceedings that might require Manassen's joinder as a defendant in order for that right to be properly determined. The fact that the proposed scope of work for the SPL includes, amongst other things, the investigation of the circumstances surrounding the Company's entry into certain financing agreements with third parties including Manassen, does not give rise to an issue which requires Manassen's joinder for the purposes of these proceedings. No claim for relief is sought in these proceedings in respect of the validity of any of these agreements.
36 In my view, r 9.05 of the Rules is relevant and not inconsistent with r 2.13(3) of the Corporations Rules and for that reason the discretion to join Manassen as a party should be exercised in accordance with the criteria in r 9.05. Accordingly, Manassen's joinder must be "necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined": Rules, r 9.05(1)(b)(ii). Manassen must show that its rights against, or liabilities to, a party in respect of the subject matter of the proceedings would be directly affected by an order that might be made in the action: ECAP Finance at [29] referring to News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410 (Full Court) and John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1. It is not sufficient to show that the applicant might be better off financially if the case was decided one way or another.
37 In Onefone Australia Pty Ltd v One.Tel Limited; Weston v Publishing and Broadcasting Limited [2007] NSWSC 1320, Barrett J considered an application by prospective defendants for leave to be heard on a special purpose liquidator's application to vary the function and powers he held and extend the time within which the originating process could be served. In refusing the application, Barrett J observed that:
[21] To the extent that examinations may be undertaken, that will be a product of yet further and separate applications made by the special purpose liquidator in the exercise of the extended powers and in furtherance of the extended functions, assuming the extensions are made. The question whether particular examinations might, for example, entail an abuse of process would logically be addressed if and when those particular examinations were initiated, not when the question before the court was the general question whether the purposes of the appointment will be served by pursuing examinations of a particular kind or on a particular subject.
…
[24] The status or capacity of some of the PBL parties as persons who are (or are associated with) examinees or potential examinees is also insufficient to warrant grant of a right of audience upon the hearing of the application for extension of powers and functions. As I have said, they will have the chance to challenge moves or further moves to examine them in the ordinary course if and when those moves are made in the ordinary course.
[25] In summary, I see no good reason why the PBL parties should be regarded as having such an interest as to make it necessary or desirable that they be heard on the question whether the special purpose liquidator's functions and powers should be extended to allow him to put into motion processes which any other liquidator could put into motion as a matter of course and without assistance from the court.
38 A similar outcome was reached in the context of the prospective defendant in a derivative leave application in Carpenter v Pioneer Park Pty Ltd [2004] NSWSC 973; (2004) 186 FLR 104. In that case, Barrett J noted that (at 109 [16]):
…Part 2F.1A is concerned with the domestic process by which a company makes decisions relevant to initiation and continuation of legal proceedings. The statutory provisions aim to counter the effects of inaction on the part of those who would normally decide such matters internally. In most cases, those persons will be directors whose inaction may be a product of self-interest. Here, the inaction upon which Mr Carpenter seems likely to rely is the inaction of an unfunded liquidator. The provisions do not, in my opinion, have in view the welfare or interests of persons who are, from the company's perspective, "outsiders". They enable anyone with a particular form of "insider" status described in s 236(1)(a) to seek the court's assistance in taking over the role of the normal decision makers in relation to a particular proceeding. The court's function is essentially a screening function. It must assess against specified criteria the litigation proposal the applicant has in mind for the company. If that proposal is found by the court to meet the criteria, it must grant leave enabling the applicant to pursue it for the company.
39 The basis on which joinder was refused was stated as follows (at 109 [17]):
The intended defendant in the proposed proceeding no doubt has an interest of a general kind in the question whether leave should be granted under Pt 2F.1A. If leave is granted, that person will be sued (or is likely to be sued). If it is not granted, the person will not be sued, at least at the instigation of the person who has failed to obtain leave under Pt 2F.1A. But this cannot, in my view, form a basis for intervention under Pt 8, r 8… The question whether leave should be granted under Pt 2F.1A can be decided perfectly well in the absence of the intended defendant. No legal liability or other legal consequence will accrue to that person by any grant of leave. The presence and involvement of the person when the leave question is argued is in no sense "necessary" to an effectual and complete determination of the matters with which Pt 2F.1A is concerned.
The Court of Appeal subsequently refused leave to appeal from this decision: Australia and New Zealand Banking Group Ltd v Carpenter (unreported, NSWCA, 20 May 2005).
40 In Freehills, in the matter of New Tel Limited (in liq) ACN 009 068 955 [2008] FCA 762, during the course of ex parte proceedings concerning the service of an examination notice, the father of the proposed examinee made an application to be heard under r 2.13 of the Corporations Rules and alternatively sought to offer assistance to the Court as amicus curiae. McKerracher J declined to grant the applicant leave to be heard as his Honour regarded the proceedings to be properly ex parte and in circumstances where the remedies available to those who sought to be heard and also those available to the examinee were preserved until a later time (at [48]). This approach is consistent with that taken by the Court in Onefone and Carpenter.
41 I am satisfied that even though Manassen may be a target of the proposed investigation by the SPL and as such clearly has a general interest in the application, it is not a necessary party and should not be joined under r 2.13(3) of the Corporations Rules. The issues relevant to the Court's consideration of appointing a SPL can readily be decided in the absence of Manassen being joined as a party. If a SPL is appointed, and the SPL exercises powers which directly impact Manassen then its rights are preserved and may be exercised at that later time.
42 I now turn to the separate issue of whether Manassen should nonetheless be granted to leave to be heard as a non-party, and if so, on what conditions.