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[2010] NSWSC 1255
procedural. Application dismissed. Mr Seller was ordered to pay the liquidators’ party/party costs of and incidental to the application, including costs thrown away by the adjournment of the examination on 25...
The court refused to cancel the examination summons. The liquidators had a proper reason to examine Seller: he could provide information about Valofo’s affairs and the transactions being challenged in existing litigation. The fact that settlement talks were also occurring did not make the examination abusive. The court was not persuaded that the liquidators’ main purpose was to force Seller to settle. Seller had to pay the liquidators’ party/party costs, including certain costs wasted when the examination was adjourned.
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2,400 words · generated 01/10/2026
This is an ex tempore decision of Palmer J in the Equity Division, Corporations List of the New South Wales Supreme Court. The judgment records the decision as “Application dismissed” and concerns an application by Ross Seller to set aside an examination summons issued at the request of the liquidators of Valofo Pty Ltd (in liquidation) ([1]–[2], [37]).
1 cited instrument linked from this judgment.
The summons was issued on 30 June 2010 under s 596B of the Corporations Act 2010 (Cth), requiring Seller to attend an examination about Valofo’s affairs on 25 August 2010 ([1]). The examination was adjourned that day so Seller could apply to set aside the summons ([2]). He alleged that the liquidators’ predominant purpose in issuing and maintaining it was to pressure him into agreeing to settlement terms imposed by them ([2], [26]).
The dispute sat within wider proceedings about the affairs of Valofo and related trusts and companies. The background reproduced at [4], drawing on the earlier judgment in Londish v Sheahan [2010] NSWSC 337, describes Valofo’s indirect connection to service-station assets held through trust structures and disputes about the handling and distribution of funds. Valofo had commenced proceedings against Seller and others in December 2009, seeking, among other things, payment into court of net sale proceeds and restraints on dealings with assets ([5]). The liquidators said Seller could provide information relevant to those affairs and to the transactions challenged in the litigation. Seller did not dispute his capacity to provide relevant information ([6], [28]).
Settlement discussions were underway while the summons process was being pursued. The liquidators’ correspondence identified claims and transactions they wished to investigate, sought a substantial payment as part of a global settlement, and noted that they were prepared to pursue the company’s claims through the courts ([7]). The parties met and the liquidators sought information about a loan and a payment to Davlon Management ([8]–[9]). The liquidators later asked whether Seller remained interested in settlement and whether his solicitors would accept service of the summons ([10]). Information was provided in stages, but the liquidators considered it incomplete and continued to request the material they had identified ([11]–[16]).
Seller also relied on a conversation with liquidator Ian Lock on 23 August. Seller alleged that Lock referred to the ATO’s Wickenby investigation and overseas funds in a threatening way. Lock admitted referring to Wickenby, but gave a different account of the purpose and context ([17]–[21]). Palmer J accepted Lock’s evidence. The judge considered the probabilities, Lock’s credibility, and the fact that, even on Seller’s account, Lock had not threatened to raise Wickenby in the examination to embarrass him publicly ([22]–[25]).
The central question was not whether the summons could serve a proper function in the abstract. It was whether the liquidators were using it for a purpose for which examination proceedings were not designed, particularly to coerce Seller into accepting settlement terms ([26], [29]). The court was not satisfied that Seller had established that improper purpose and dismissed his application ([30], [36]–[37]).
The judgment’s reasoning has two connected parts: the governing purpose-based test and the court’s assessment of the evidence about the liquidators’ purpose.
At [27], Palmer J referred to Williams v Spautz (1992) 174 CLR 509 and set out the proposition that proceedings are an abuse where they are not brought to be prosecuted to a conclusion, but are used to obtain an advantage for which they were not designed or a collateral advantage beyond what the law offers. The quoted proposition also says an improper act by the party instituting the process is not essential. At [29], the judge applied that reasoning to the examination summons: even if issuing the summons was supportable as an exercise of the liquidators’ power, a sufficiently improper purpose for exercising that power could make the process abusive.
A key factual matter was that the summons had a legitimate investigative capacity. Seller did not dispute that he could give information relevant to Valofo’s examinable affairs. The court found it was not in doubt that the information could materially assist the liquidators in prosecuting their existing litigation ([28]). That fact did not automatically resolve the abuse allegation, but it meant the summons was not, on its face, incapable of serving a legitimate purpose.
The court then considered whether coercion was the liquidators’ predominant purpose. It accepted that they intended to continue the litigation if settlement discussions failed ([30]). It also accepted their evidence that delays in providing requested information caused them to doubt whether Seller was serious about negotiations. In that context, the communication that the examination would proceed was treated as a reminder that negotiations needed to progress or the parties would continue with litigation, not as a coercive threat ([32], [36]).
The judge rejected the idea that continuing a litigation step during negotiations is inherently abusive. Settlement discussions commonly occur while litigation proceeds, and the use of a legitimate step may put pressure on the other party to settle or litigate. That pressure alone did not establish abuse ([31]). The distinction was between ordinary pressure arising from a party pursuing litigation and using the process for an ulterior purpose, such as coercion unrelated to the process’s intended function.
The court also rejected Seller’s argument that liquidators should be subject to special constraints in using examinations while settlement talks are in progress ([33]–[35]). Palmer J acknowledged that examination is a statutory benefit not generally available to other litigants. He explained that it exists because liquidators face particular difficulty investigating a company’s affairs and deciding whether claims against third parties should be brought ([34]). But the court said the same general purpose-based question applies to an examination as to another litigation process: is it being used for its intended purpose, or is it being used as coercion or to achieve a collateral purpose? ([35]).
Finally, the court resolved the disputed Wickenby conversation in the liquidators’ favour. Palmer J accepted Lock’s evidence, relying on its inherent probability and his assessment of Lock as a credible witness ([22]–[24]). The judge added that, even accepting Seller’s version, the words did not amount to a threat to raise Wickenby in the examination to embarrass him publicly ([25]). The evidence therefore did not persuade the court that the examination was being held over Seller as a coercive weapon. The application was dismissed ([36]–[37]).
The judgment does not describe a change in the law. It applies a general abuse-of-process proposition attributed to Williams v Spautz to a liquidator’s examination summons. The decision is therefore best read as an application and explanation of that purpose-based approach in the particular context of concurrent examinations, litigation and settlement discussions.
Before the decision, the material quoted in the judgment already supplied the core test: proceedings may be an abuse if they are not intended to be prosecuted to a conclusion and are instead used to obtain an advantage outside the purpose of the process ([27]). Palmer J applied that idea to the summons, explaining that the summons could be legitimate in its capacity but abusive if exercised for an improper purpose ([28]–[29]).
The decision’s practical clarification is that the presence of settlement pressure is not, by itself, enough. A procedural step pursued while negotiations continue may make the other party choose between settling and litigating, but that effect does not alone show that the process has been misused ([31]). The court focused on the liquidators’ purpose and intention to proceed with the litigation if negotiations did not succeed ([30], [36]).
The judgment also explains why liquidators have access to examinations: they may lack direct knowledge of the company’s affairs and need information to investigate and assess possible claims ([34]). It does not hold that an examination is immune from abuse-of-process scrutiny. Rather, the court states that the same basic inquiry applies as to other processes, namely whether the process is being used for the purpose for which it was designed or as a means of coercion or collateral advantage ([35]).
The judgment does not provide a detailed account of the statutory requirements of s 596B, nor does it analyse the section’s text. It cites s 596B as the basis for the summons, but its reasoning is directed to abuse of process and the alleged purpose behind use of the summons ([1], [26]–[37]). Any broader account of the section would go beyond the judgment’s treatment of it.
At [27], the judgment sets out the proposition from Williams v Spautz that proceedings may be abusive when they are not pursued to a conclusion but used to obtain an advantage for which they were not designed, or a collateral advantage beyond what the law offers. In plain English, the court asks whether the process is being used to do the job it exists to do, or as leverage for a different end.
At [29], Palmer J makes clear that a summons may be capable of serving a proper purpose and still be abusive if it was issued or maintained for an improper purpose. In plain English, the question is not only whether the process could be useful, but why it was being used.
At [31], the judge says that continuing to prosecute litigation while settlement discussions are ongoing does not, by itself, constitute abuse, even if doing so puts pressure on the other party. In plain English, having to negotiate while litigation continues is not enough, without more, to prove misuse of the court process.
At [34], the judgment explains that examination powers assist liquidators who need to investigate company affairs and determine whether claims should be brought. In plain English, the examination is an investigative tool given to address the liquidator’s information gap.
At [35], the court frames the question as whether the liquidator is using the process for its intended purpose or instead using it as coercion or to achieve a collateral purpose. In plain English, the same purpose-focused scrutiny applies to examinations as to other litigation processes.
At [37], the judge concludes that he was not satisfied there had been an abuse of process and dismisses the application. The conclusion is specific to the evidence before the court, including its findings about the liquidators’ intended continuation of the litigation and the disputed conversation.
The decision is relevant to fact patterns where a liquidator obtains an examination summons against a person who may have relevant information, while litigation and settlement discussions are also underway. It is particularly pertinent where the person summoned alleges that the examination process is being used as leverage to force settlement.
The judgment indicates that several questions may matter in such a dispute. First, can the person provide information relevant to the company’s affairs or the liquidator’s investigation? Here, that capacity was undisputed, and the information could assist existing litigation ([28]). Second, is there evidence that the process is intended to be pursued for its legitimate investigative purpose, or evidence that it is being maintained to secure a collateral advantage? ([29]–[30], [35]). Third, does the surrounding correspondence show an intention to continue the litigation if settlement discussions fail, or instead an intention to use the process only as a threat? ([30], [32], [36]).
The decision also bears on allegations based on the timing of a summons. Issuing or continuing a litigation step while negotiations occur does not, by itself, establish abuse ([31]). The reasoning does not mean that settlement discussions can never be relevant. Rather, the court treated the existence of negotiations and the pressure inherent in continuing litigation as insufficient, without evidence establishing an improper predominant purpose.
This judgment does not establish a checklist or state that any particular evidence will always prove or disprove abuse. The result turned on the judge’s assessment of the evidence, including the summons’s legitimate investigative capacity, the liquidators’ intention to continue their litigation, the delays in providing information, and the credibility findings about the Wickenby conversation ([22]–[25], [28], [30], [32], [36]).
The judgment text supplied here contains no discussion of later judicial treatment of this decision. It therefore does not establish whether later courts followed, distinguished, or otherwise considered Valofo, In the matter of - Sheahan & Lock as Liq of Valofo Pty Ltd (in liq) [2010] NSWSC 1255.
The authorities identified in the judgment are Williams v Spautz (1992) 174 CLR 509, which Palmer J treated as providing the authoritative discussion of improper purpose and abuse of process ([27]), and Londish v Sheahan [2010] NSWSC 337, which the court referred to for background to the parties’ earlier proceedings ([3]–[5]). Those are the relationships shown by this judgment; they do not answer how later courts treated the present decision.
The judgment does not define in detail how a court should determine a liquidator’s “predominant intention” where multiple purposes coexist. It uses that formulation when addressing Seller’s allegation ([26], [30]), but does not set out a general method for weighing an investigative purpose against a possible settlement-related purpose.
Nor does it specify what kinds of evidence will usually demonstrate that an examination is being used as coercion rather than as a legitimate investigative step. The decision illustrates a fact-specific assessment of correspondence, the chronology of information requests, the liquidators’ stated intention to proceed with litigation, and witness credibility ([7]–[25], [30]–[36]). It does not say that those indicators are exhaustive.
The judgment also does not examine the detailed statutory limits or procedural requirements of s 596B. Its reference to that provision identifies the basis for the summons, while the reasons focus on abuse of process ([1], [26]–[37]). Questions about the operation of s 596B beyond the issue decided are not resolved by this judgment.
Finally, the decision does not determine whether a summons issued in different circumstances, such as where the person cannot provide relevant information or where the liquidator does not intend to pursue the examination, would be abusive. The court’s reasoning makes purpose central, but the application was decided on the facts before it: Seller could provide relevant information, and the court accepted that the liquidators intended to proceed with their litigation if settlement discussions failed ([28], [30], [36]).
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CITATION : Valofo, In the matter of - Sheahan & Lock as Liq of Valofo Pty Ltd (in liq) [2010] NSWSC 1255
JURISDICTION : Equity Division Corporations List
CATCHWORDS : CORPORATIONS - EXAMINATION - ABUSE OF PROCESS - whether issue and maintenance of examination summons was designed to coerce applicant into settling proceedings - whether examination summons should be set aside as abuse of process.
LEGISLATION CITED : Corporations Act 2010 (Cth) - s 596B
CASES CITED : Londish v Sheahan [2010] NSWSC 337 Williams v Spautz (1992) 174 CLR 509
PARTIES : John Sheahan & Ian Lock as Joint and Several Liquidators of Valofo Pty Ltd (in liq) (Plaintiffs/Respondents) Ross Edward Seller (Applicant)
COUNSEL : D. Sulan (Plaintiffs/Respondents) T.D. Castle (Sol) (Applicant)
SOLICITORS : O'Neill Partners (Plaintiffs/Respondents) Atanaskovic Hartnell (Applicant)
2010/152694 Sheahan & Lock as Liq of Valofo Pty Ltd (in liq)
1 On 30 June 2010, the liquidators of Valofo Pty Limited procured the issue of a Summons to Mr Ross Seller under s 596B of the Corporations Act 2010 (Cth), to attend an examination on 25 August 2010 into the affairs of Valofo. 2 On 25 August 2010, Mr Seller's examination was adjourned in order to enable him to apply to set aside the Examination Summons. Mr Seller now moves to set aside the Summons on the ground that it is an abuse of process. He says that the liquidators' predominant purpose in issuing the Summons was, and is, to coerce him into accepting a settlement of litigation on terms dictated by the liquidators but not agreed by Mr Seller. 3 The relevant background to this application is set out in my judgment in earlier and different proceedings between some of the parties: Londish v Sheahan [2010] NSWSC 337. The parties to this application have requested that I hear it, notwithstanding my involvement in the earlier proceedings. 4 The relevant portions of my earlier judgment which give a background to this application are as follows: "10. Valofo is the sole unitholder of the Baltarna Trust which, in turn, is the sole unitholder of the Prime Index Lease Trust ("PILT"). PILT Nominees Limited is the trustee of PILT. The assets of PILT are a number of service stations which had been leased to Shell Petroleum.
Valofo is a wholly owned subsidiary of Londish Nominees Queensland Pty Ltd ("LNQ") which is, in turn, a wholly owned subsidiary of Vesudi Investments Pty Ltd ("Vesudi"). The shareholders of Vesudi are (omitting a minor shareholder of no consequence) three companies holding roughly one-third of the shareholding each, namely Tiffany Properties Pty Ltd ("Tiffany"), Argendram Pty Ltd ("Argendram") and Masalo Pty Ltd ("Masalo"). Argendram is controlled by Mr Peter Londish,Tiffany by Mr Sid Londish, and Masalo by Mr Bowman.
Mr Sid Londish and Mr Bowman, acting in concert through their companies, control Vesudi which, in turn, controls LNQ which, in turn, controls Valofo which, in turn, controls the Baltarna Trust, which is the sole beneficiary of PILT, which owns the service stations.
Mr Sid Londish and Mr Bowman say that PILT was established by the parties with the intention that, by the time the leases of the service stations to Shell expired, the mortgages on the properties would be fully paid out, the properties would be sold, the PILT trust would be wound up and the profits of the trust distributed to the Baltarna Trust which, in turn, would distribute 55% of the profits to its sole unitholder, Valofo, and 45% to interests associated with a Mr Crossman and a Mr Sellers, who were instrumental in setting up the investment scheme. The distribution of profits to entities controlled by Messrs Crossman and Sellers respectively was to be effected via the Baltarna Class Trust, which was to be a beneficiary of the Baltarna Trust.
It appears that by 2008 the mortgages on the service stations had been paid out. On 6 March 2008 Mr Seller, as appointor under the Baltarna Trust Deed, removed the Baltarna Class Trust as a beneficiary of the Baltarna Trust, leaving the whole of the beneficial interest in the Baltarna Trust assets in its sole unitholder, Valofo.
In May 2008 Mr Crossman commenced proceedings in this Court against PILT Nominees, the trustee of the Baltarna Trust, Baltarna Pty Ltd, and Mr Seller, claiming a declaration that the removal of the Baltarna Class Trust as a beneficiary of the Baltarna Trust was void and claiming orders for the removal of Baltarna as trustee of the Baltarna Trust and of PILT Nominees as trustee of PILT.
On 27 May 2008, Hamilton J granted interlocutory injunctions restraining PILT Nominees from dealing with the service stations. Notwithstanding this injunction, in June 2008 PILT Nominees borrowed $11.3M on the security of the service stations. The directors of PILT Nominees are Mr P. Londish and Mr Seller. Of the proceeds of the loan, about $5.3M was paid by PILT Nominees to Davlon Management ("Davlon"). Mr P. Londish is the sole director and beneficial shareholder of Davlon.
On 16 July 2009, by a resolution of the directors of Valofo, the company was placed in voluntary administration and Messrs Sheahan and Lock were appointed administrators. The directors of Valofo who passed the resolution were Mr Sid Londish and Mr Bowman. There is no doubt that Valofo was placed in administration in order that the administrators, with the benefit of litigation funding, could pursue Valofo's rights, through its unitholding in the Baltarna Trust, to attack the transactions with the service stations which had been effected by PILT Nominees and to secure distribution of the sale proceeds of the PILT assets ultimately to Valofo, and thence to their own companies.
In this regard we assume that all parties are intimately familiar with the affairs of PILT, Baltarna and Valofo, and that we do not therefore need to articulate the contemplated claims that our clients propose to investigate and, if appropriate, pursue. Suffice to say that our clients' starting position is that Valofo is entitled to at least $7.5 million, and that through the actions of one or more of PILT, Baltarna, Seller and Peter Londish those monies are not now readily available to the Company.
In order to reach a global settlement of all matters, the Company will need to receive a substantial payment, which will then be applied by its liquidators in accordance with the provisions of the Corporations Act. Any settlement will necessarily deal with, inter alia, the following matters:
the debt of $419,222 owing to the Company by Feenix Investments Pty Ltd;
repayment of the $5.3/$5.5 million paid by PILT Nominees to Davlon Management Pty Ltd;
$3.34 million paid by PILT Nominees to Baltarna Pty Ltd, described as trustee commission;
the repayment of the ANZ facility of $4 million ($11.5 million less $7.5 million);
an account of the residual funds and assets held by PILT;
any alleged misappropriation of funds and breach of directors' duties;
an account of the distribution of the PILT ANZ facility of $11.5 million;
an account of the PILT NAB facility and any distribution therefrom;
Your clients would be aware that our clients are fully prepared to pursue the Company's entitlements through the Courts. Even a cursory investigation into our clients' track record would reveal their expertise in relation to this type of litigation and their prospects of success. Your clients should be under no illusion that this is a matter which will simply go away.
However, our clients are cognisant of the fact that if they proceed with examinations, and any resultant litigation, they may be required to obtain external litigation funding which would necessarily result in a significant part of any ultimate recovery going to a funder. It is also inevitable that there will be significant professional costs incurred during the course of any investigation and subsequent litigation, all of which will result in an ultimately diminished return to the Company's stakeholders.
Accordingly our clients believe that an opportunity exists now to resolve this matter for a significantly lower sum than if the matter is allowed to continue. We believe that this represents a genuine opportunity to your clients for an early resolution of all matters in dispute and look forward to meeting with a view to achieving such an outcome." 8 A meeting between the parties and their representatives took place on 28 May 2010. The possibility of a settlement of the liquidators' claims against Mr Seller was discussed. The liquidators said that they wished to have further information from Mr Seller about the borrowing by PILT of $11.5 million from ANZ Bank and about the transaction between PILT and Davlon. 9 On 2 June 2010, the liquidators sent a request to Mr Seller's solicitors seeking the provision of specified information. There was no response. 10 On 25 June, the liquidators' solicitors emailed Mr Seller's solicitors, enquiring whether Mr Seller was still interested in settlement discussions and enquiring further whether the solicitors had instructions to accept service of an Examination Summons to be issued to Mr Seller. The Examination Summons was in fact issued on 30 June 2010. 11 After some delay, Mr Seller's solicitors responded on 2 July to the request for information made on 2 June, but they provided only some of the information sought. 12 On 2 July the liquidators' solicitors sent to Mr Seller's solicitors a draft Deed of Settlement and release under cover of an email which made it quite clear that the liquidators' agreement to enter into the deed depended upon the provision by Mr Seller of the information which had been requested and the liquidators being satisfied by that information that the proposed compromise was acceptable. 13 On 22 July the parties and their solicitors attended a further meeting to discuss settlement. Further information was sought by the liquidators from Mr Seller as set out in an email from the solicitors sent later that day. 14 On 5 August Mr Seller provided certain information to the liquidators, but they regarded it as far from complete or satisfactory and they insisted on provision of all information requested. Mr T Castle, solicitor, who appears for Mr Seller, does not submit that the liquidators were not justified in insisting on receiving that information in order to enable them to determine whether to enter into a settlement with Mr Seller. 15 On 16 August Mr Seller's solicitors provided further information to the liquidators, but still it was not complete and the liquidators insisted upon all information requested being provided. 16 On 18 August the liquidators' solicitors sent the following letter to Mr Seller's solicitors: "We confirm that Mr Seller has not yet made available to us the books and records of PILT Nominees Pty Ltd, (and the PILT and Baltarna Trusts), as set out in our file note to you dated 22 July 2010.
In relation to the proposed terms of the Settlement Deed, our understanding is that on the basis of the proposed deductions as advised by your client, a sale of the Property for $3.9 million (for example) would involve the following deductions:
This would leave approximately $1.54 million available for Valofo. Obviously if the sale is for a price less than $3.9 million, the return to Valofo will reduce accordingly. This is not an acceptable outcome for Valofo.
We note that at the conference with your client at our offices on 28 May 2010, a figure of $2 million was the sum advanced by Mr Seller as being the likely net outcome for the Company after the sale of the Property and a vesting of the remaining trust assets. Is PILT in possession or control of any other funds or assets other than the Davlon Management loans?
We are instructed that if Mr Seller is not able to guarantee a net return to Valofo of $2.0 million from the sale of the Property, then the arrangements are not acceptable. The obvious source of any additional funds, is a return of a portion of the Trustee's fees and Manager's fees apparently paid from trust funds.
We await your response to this letter, however we are instructed to:
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Londish
Sheahan
(1992) 174 CLR 509
Application dismissed. Mr Seller was ordered to pay the liquidators’ party/party costs of and incidental to the application, including costs thrown away by the adjournment of the examination on 25 August 2010. The costs assessor was to determine which items properly qualified as costs thrown away.