Are the grounds of appeal reasonably arguable?
49 To the extent that the exercise of a power, or the refusal to exercise a power, by the learned primary judge involved a discretionary judgment, the applicants must establish that the error is one that may be disturbed on appeal in accordance with principles stated in House v The King (1936) 55 CLR 499 at 505:
It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.
50 The grounds of appeal are to the effect that the learned primary judge misconstrued the statute and thereby acted on a wrong principle. I am satisfied that, if made out, the alleged errors are of a kind that may justify interference by an appellate court in accordance with the principles in House.
51 The factual context in which the interlocutory process came before the learned primary judge is set out at [6] - [17] of his Honour's reasons. It is not necessary to recite all of the facts here. It is sufficient to say that GEBIE was the recipient of more than $5m in Commonwealth grant monies, paid for the purpose of funding indigenous training programs. Until 1 July 2014, GEBIE was a wholly owned subsidiary of The Groote Eylandt and Bickerton Island Enterprises Aboriginal Corporation ICN 3897 (GEBIEAC). GEBIEAC entered into a joint venture with IST pursuant to which the grant moneys were transferred by GEBIE to IST soon after their receipt. The grant money is said by the respondents to be unaccounted for (at least by reference to documents presently in their possession).
52 The applicants do not take issue with the factual basis upon which the learned primary judge determined the interlocutory process. Importantly, the facts as summarised by the learned primary judge are to be read as a summary of the matters the respondents' seek to investigate. His Honour noted, as a matter of fairness, that Ms Kassiou had filed affidavits in which she had denied any wrongdoing in connection with the company. These reasons should be read in the same light.
53 The first observation that may be made about the arguments underlying the grounds of review is that they differ from the arguments advanced before the learned primary judge. Similarly, the relief sought on the appeal does not wholly correlate with the relief sought on the interlocutory process.
54 The orders sought in paragraphs 1(a) and 1(b) of the interlocutory process were, in effect, an attempt to obtain an advance ruling so as to circumscribe the topics in respect of which Ms Kassiou and Mr Mitchell might be examined. The position adopted on the interlocutory process was absolute: they sought to "carve out" from the examination all questions (and all documents) that drew out information concerning their personal or confidential affairs. At the heart of their submissions was a complaint that information that was private or confidential to the examinees could not also amount to information concerning GEBIE's "examinable affairs". The relief sought on the interlocutory process contemplated no circumstance in which a "book" produced at an examination or an answer given to a question may relate both to the company's examinable affairs and to matters that were properly considered private and confidential to the examinees in the ordinary sense.
55 The phrase "examinable affairs" has a wide meaning: see s 9 and s 53 of the Corporations Act. It includes the company's property, liabilities, transactions and management.
56 In their submissions on this application, the applicants acknowledged that information concerning their private or confidential information may also be fairly described as information "about" GEBIE's examinable affairs. That acknowledgment was then qualified in some ways, including by their second proposition: the liquidators must first show (indeed, "declare") that litigation against the examinees was in contemplation and the contemplated causes of action must be identified. In the absence of some kind of declaration to the effect that litigation was contemplated, it was submitted, the purpose of the proposed examinations could not be ascertained, the summonses should be regarded as too ambitiously drawn, and the orders providing for their issue were beyond power.
57 The submission does not have reasonable prospects of succeeding on an appeal.
58 It is well established that on an application for orders under Pt 5.9 of the Corporations Act and its predecessors, the Court may order an examination for the purpose of determining whether there are reasonable grounds, including evidence, to litigate a case to a successful judgment and to ascertain the likelihood of any judgment being satisfied: Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 at 307.
59 In Contura Mining, an examination summons was issued to a person suspected of acting in the capacity of a de facto director. The recipient of the summons argued that it was necessary for the liquidators to prove that he had acted in that capacity in order for the examination summons to validly issue. White J rejected the argument. His Honour said (at [29]):
Contrary to the applicants' submissions, it was not necessary for the respondents to adduce evidence, for the purposes of obtaining the order for production pursuant to s 579(9) [sic], that Mr Mallios was the particular officer within the applicants who had given instructions or directions to BJ Jarrad or Jarrad Equipment, or that those entities had been accustomed to act in accordance with those instructions or directions. As counsel for the respondents observed, the respondents were entitled to investigate the existence of shadow directorships, and did not have to adduce prima facie proof that such directorships existed before being able to examine on the topic. It is open to the respondents to examine Mr Mallios with a view to eliciting information bearing upon whether he, some other identified person, or some unidentified person within the applicant group had given instructions and directions to BJ Jarrad and Jarrad Equipment.
60 The applicants made no submission to the effect that the decision in Contura Mining is plainly wrong. The decision is consistent with the judgment of Gardiner AsJ in Re Banksia Securities Ltd [2013] VSC 416; (2013) 278 FLR 421 (at [25] - [26]) to the effect that questioning and production of documents on an examination may be required where the company (by its liquidators) has not made, described or articulated any claim against the examinee or the person to whom the order for production of documents is directed. It is also consistent with what Lander J said in Evans v Wainter Pty Ltd (2005) 145 FCR 176 at [64] (Ryan and Crennan JJ agreeing at [1], [271]):
The various parties referred to in the definition of 'eligible applicant' apart from ASIC assume responsibilities within the corporation in circumstances where they have had no previous involvement. They are all appointed for the purpose of protecting the assets of the corporation. They may or may not get assistance from the directors and officers of the corporation. In many cases they do not. In many cases their appointments follow some misconduct on the part of the corporation's directors and officers. Indeed, as will shortly be seen, s 596B recognises that an eligible applicant may need to use the powers under Pt 5.9 to inquire into the conduct of the corporation's officers for the purposes of establishing whether they have been guilty of misconduct. Whether eligible applicants get assistance or not, they need to be informed of the corporation's examinable affairs.
61 His Honour's reference in that passage to "misconduct" is to be understood as a reference to that word as defined in the Corporations Act to include fraud, negligence, default, breach of trust or breach of duty. His Honour continued (at [81] - [82]):
An examination to determine whether the corporation would be likely to succeed in litigation against its officers, auditors or third parties would be within the examinable affairs of a corporation. Such an examination would assist an eligible applicant in identifying a chose in action which is an asset of the corporation: Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301; Re Spedley Securities Ltd (in liq) (1990) 3 ACSR 366 at 376.
An examination to determine whether any chose in action will be ultimately recoverable from any party or that party's insurer is also within the contemplation of the section: Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (1993) 61 SASR 557. Indeed, such an examination may be of a person against whom litigation is contemplated or even pending: Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537; Hamilton v Oades (1989) 166 CLR 486 at 497; Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513.
62 There was no contention that a Full Court on this appeal would or should be invited to reconsider the correctness of the decisions in Evans v Wainter or Grosvenor Hill.
63 The relevant authorities were considered and applied by the learned primary judge in the present case for a purpose and in a manner that cannot reasonably be open to challenge: Reasons at [27] - [37]. His Honour rejected a submission to the effect that the decisions in Evans v Wainter and Grosvenor Hill were to the effect that an order for an examination could not be made for the purposes of enabling a liquidator to ascertain whether a cause of action existed, or for the purpose of investigating the likelihood of recovery without first contemplating and formulating a cause of action against the examinee. The challenges to this aspect of his Honour's reasoning are not reasonably arguable.
64 His Honour went on to say (at [36]):
As already noted, Mr Phillips has deposed that the plaintiffs wish to ascertain whether causes of action exist in the name of GEBIE against Ms Kassiou, Mr Mitchell and/or IST and, if so, whether they will have the financial capacity to satisfy any potential judgment which may be obtained against them. Mr Phillips has also deposed that, should it appear that there is a potential cause of action available to GEBIE, the plaintiffs wish to ensure that there will be some prospect of Ms Kassiou, Mr Mitchell and/or IST being able to satisfy any judgment it obtains. I observe that the Applicants did not challenge Mr Phillips on his statement that the plaintiffs have this purpose, nor (other than as outlined above) did they contend that such a purpose is not a legitimate purpose.
65 The applicants have not demonstrated an arguable basis for challenging that aspect of his Honour's judgment.
66 In respect of the remaining propositions underlying the grounds of appeal, Counsel for the applicants sought to demonstrate in a practical sense where the limits of questioning at an examination might be drawn. Counsel submitted that the matters personal to the applicants in respect of which they may legitimately be examined were limited to:
(1) personal information whereby the respondents might assess whether the applicants currently have sufficient assets against which a judgment may be executed should proceedings be brought against them; and
(2) personal information whereby the respondents might assess whether assets of the company have been directly transferred to them in circumstances that would give rise to a proprietary tracing remedy.
67 All other information of a personal or confidential nature was said to fall outside of GEBIE's examinable affairs and could not, it was said, be relevant to the proper discharge of the respondents' functions.
68 Counsel submitted that if money had been misappropriated from a company by its directors and expended, for example, on medical bills or at casinos or other "licensed" premises, then the money would be forever lost to the company's creditors. It could, in Counsel's submission, form no legitimate part of an examination to investigate the fact or circumstances of that expenditure (whether through documents or questioning or both) because there would no longer be any asset in existence that might form the subject of a proprietary remedy in the event that proceedings were commenced.
69 These submissions cannot possibly succeed on appeal. GEBIE's examinable affairs are not limited to its tangible and traceable property. Its examinable affairs clearly include any causes of action that may lie against its former officers, whether or not proprietary in nature and whether or not any judgment against its former officers might ultimately be satisfied.
70 Further, as a question of fact, the learned primary judge held on the evidence before him that there was a proper evidentiary basis for examination summonses to have been issued to Ms Kassiou and Mr Mitchell. It was, his Honour held, a case in which it was not difficult to discern causes of action that might be available to the liquidators appointed to GEBIE (Reasons [66] - [67]). That assessment is not affected by any arguable appealable error.
71 There is a further erroneous assumption underlying the propositions sought to be advanced on the appeal. It was said that the summonses and orders requiring the production of bank statements for accounts held by the examinees and IST would contain "intimate details of their private lives such as their grocery shopping, Medicare receipts and so on" and so could not lawfully be ordered to be produced. The same complaint was made of paragraph 10 of the schedules to each of the summonses issued to Ms Kassiou and Mr Mitchell. That category was expressed as follows:
10. Documents which concern, record or evidence the current assets and liabilities of:
10.1 IST;
10.2 Themelina Kassiou; and/or
10.3 Gregory Francis Mitchell.
72 It may be acknowledged that a book may contain information that relates to a company's examinable affairs whilst also containing information that may fairly be described as private in nature. The personal information may well relate to the examinable affairs of the company or it may not. However, the circumstance that a book may contain both relevant and irrelevant information does not bring it outside of the range of documents a court may lawfully order be produced. To the extent that the applicants propose to submit otherwise on appeal, the submission could have no prospect of success.
73 Further, the learned primary judge found that the categories of documents specified in the summonses issued to Ms Kassiou and Mr Mitchell and in the orders directed to ANZ and NAB did not, on their face, require the production of any document that related solely to the examinees' private information and that the categories were otherwise expressed in terms that did bear sufficient relation to GEBIE's examinable affairs (Reasons [28], [42], [53] - [62]). The arguments advanced on the present application did not disclose any reasonable basis for questioning the correctness of those findings.
74 That is not to say that the summonses and orders would not have the practical effect of requiring the production of documents that do indeed contain intimate or commercially sensitive information. In that regard, the primary judge noted (with respect, correctly) that "examinations are a coercive process which involves an intrusion into matters which the Applicants are otherwise entitled to keep private" (at [35]). The fact that a summons might capture such information does not demand the conclusion that it is not confined to its statutory purpose. It simply reflects the ordinary consequence that a book may fall within a category of documents to be produced and yet at the same time contain personal information, some of which may bear upon a company's examinable affairs and some of which may not.
75 To the extent that a relevant document also contains irrelevant personal information, the applicants might have applied to the primary judge for alternate remedies safeguarding their confidentiality. But they did not. They adopted an all or nothing approach on their interlocutory process, at least insofar as their personal information was concerned. It can form no part of the Court's appellate jurisdiction to entertain an alternative compromise position when no such alternative compromise position was advanced before the learned primary judge: compare Contura Mining at [25]. That is especially so where the granting of orders for the preservation of confidentiality of documents produced pursuant to the summonses would involve the exercise of a discretion.
76 It has not been demonstrated by evidence or otherwise that the summonses would, on their terms, require the production of documents that could only contain information concerning the examinees' private lives but not otherwise bear upon GEBIE's examinable affairs. The contentions to that effect were founded on a misapprehension of the phrase "examinable affairs" and paid insufficient regard to the factual background against which the application for the issue of each summons was based.
77 I do not consider the applicants to have any reasonable prospect of succeeding on the appeal.