Meteyard v Love

Judgment - EX TEMPORE 1This application is an appeal from a decision of a Registrar made on 29 November 2011 disallowing a question or area of questions during a Receivers' examination. 2Rule 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, if a registrar makes a decision or does any other act in any proceedings, the Court may, on a party's application, review that decision or act and make such order as it thinks fit. The Court's role under that rule, involves a review of the registrar's decision rather than an appeal against it in the strict sense. The Court will have regard to the registrar's decision, particularly in respect of matters of practice and procedure, but will intervene in an appropriate case: Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61. 3The applicants ("Receivers") are the receivers and managers appointed to Wideform Investments Pty Ltd (receivers and managers appointed) (in liq) ("Wideform") and Luso Holdings Pty Ltd (receivers and managers appointed) (in liq) ("Luso"). The issues raised by the application are: (1) whether a question put, and potentially further questions sought to be put, by the Receivers at examination on 15 November 2011, regarding the Rush G Unit Trust that were disallowed by the Registrar fell within the "examinable affairs" of Wideform or Luso for the purposes of s 596A of the Corporations Act 2001 (Cth) and (2) whether a question, and potentially further questions, about the circumstances in which the shares in Webton Pty Ltd ("Webton") in which Wideform and Luso at one point had an indirect interest purportedly came to be recorded as beneficially held on behalf of the Rush G Unit Trust are within the examinable affairs of Wideform or Luso. 4The Receivers contend that the Registrar erred in law by disallowing the question or area of questions sought to be put regarding the Rush G Unit Trust and ruling that they were not within the examinable affairs of Wideform or Luso for the purposes of s 596A of the Corporations Act, as defined by ss 9 and 53 of the Act. 5The relevant factual background largely does not appear to be in dispute, although the First and Third Examinees rely on facts additional to those on which the Receivers rely. The Receivers were appointed to Wideform and Luso on 26 February 2010. Mr Ferreira was a director and company secretary of Luso in the relevant period, and owned its shares beneficially. Mr Ferreira was also a director of Wideform in the relevant period, and held the majority of its issued and voting shares. The only other shareholder in Wideform was Mr Paiva, who was also a director. 6Luso and Wideform together held all the issued shares in another entity, Horizon Living Australia Pty Ltd ("Horizon"). In late March 2009, share transfers were purportedly executed which transferred the whole of Horizon's shares to Messrs Ferreira and Paiva, namely 700 shares in Horizon to Mr Ferreira and 300 shares in Horizon to Mr Paiva, and a share transfer was lodged with ASIC on 14 December 2009. The validity of that share transfer is in dispute in separate proceedings in this Court. 7From 6 November 2006 until 26 February 2010, Horizon was shown on the share register of another entity, Webton, as legally and beneficially owning 40 of Webton's 120 issued shares. The Receivers contend, although I understand the First and Third Examinees do not accept, that Webton has an interest in an aged care facility in Victoria. 8On 26 February 2010, when the Receivers were appointed to Wideform and Luso, a request for correction was lodged with ASIC by a director of Webton which stated that the beneficial interest in the 40 Webton shares previously recorded as owned legally and beneficially by Horizon was in fact held by the Rush G Unit Trust, and that Horizon held those shares as trustee for that trust. Subsequently, Horizon's shares in Webton were transferred to another entity and by that entity to two further entities. 9The First and Third Examinees draw attention to additional matters for which they contend, including that the Rush G Unit Trust was settled with Rush G Pty Ltd as its trustee on 31 October 2005; Horizon was appointed as trustee of the Rush G Unit Trust on 3 November 2005; Horizon resolved to acquire units in the Webton Unit Trust on 18 October 2006; and Horizon was removed as trustee of the Rush G Unit Trust by the appointor of that trust on 18 December 2009. The Receivers have not yet had the opportunity to test the evidence relating to those matters in the examinations. 10The First and Third Examinees also contend that there is no value in the shares held by Wideform or Luso in the trustee of the Rush G Unit Trust: however, there is an open question as to whether there may be value in the shares held by Horizon in Webton, if the Receivers can show that the true position was that they were beneficially held by Horizon rather than held by Horizon as bare trustee for the Rush G Unit Trust. The First and Third Examinees also point to documents produced by the First Examinee that purportedly establish the additional matters to which I referred above. However, the Receivers are not obliged to accept those documents at face value, nor do those documents on their face exclude the possibility that Horizon might have held its shares in Webton (as distinct from units in the Webton Unit Trust) beneficially rather than as trustee for the Rush G Unit Trust, as the share register of Webton at one point recorded. 11Turning now to the question disallowed by the Registrar, Mr Ferreira was examined on 15 November 2011. Counsel for the Receivers asked several questions about the circumstances in which the nature of Horizon's interest in Webton was changed by the relevant notification to ASIC; Mr Ferreira referred to the "shareholders" in the Rush G Unit Trust; there was an exchange between Counsel for the Receivers and the examinees and the Registrar as to the proposition that a unit trust could not have shareholders; Counsel for the Receivers then asked a question as to who set up the Rush G Unit Trust, to which objection was taken by Counsel for Mr Ferreira; and that question was disallowed. 12The Registrar subsequently delivered short written reasons for judgment which noted the questions as to Horizon were permissible as Wideform was a shareholder in Horizon and expressed the view that the Receivers could only proceed with examining the affairs of the Rush G Unit Trust if they were able to establish that it was a connected entity with Wideform or Luso for the purposes of s 9 of the Corporations Act. 13Section 596A of the Corporations Act permits an examination about a corporation's "examinable affairs". That section is directed to identify the proper subject matter of an examination, and a question may in turn properly be asked in such an examination if it is relevant to a matter which is properly the subject of that examination. The term "examinable affairs" is defined in s 9 of the Corporations Act as including any other affairs of the corporation (including anything included in the corporations affairs because of s 53 of the Corporations Act) or the business affairs of a connected entity so far as they are or appear to be relevant to the corporation or anything included in its examinable affairs. In Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36 at [45], Santow JA emphasised the need for caution "in any a priori observations seeking to limit the scope of that very broadly defined expression"; see also Re Affinity Capital Pty Ltd; Indrasith v Ku [2011] NSWSC 1158 at [93] ff. Section 53 of the Corporations Act in turn defines the concept of affairs of a body corporate as including, relevantly, transactions and dealings and property of the body. The term "business affairs" of a body corporate is in turn defined in s 53AA of the Corporations Act to include any of the body's affairs. 14In this matter, the starting point should be, and I understand the Registrar to have recognised, that Horizon was a connected entity of Luso for the purposes of s 9 of the Corporations Act, because it was a related body corporate of Luso, being a subsidiary of Luso which held more than one half of its issued share capital. It follows that the Receivers were entitled to extend their examination to the business affairs of Horizon, which included Horizon's transactions, dealings and property. Those transactions included the correction of the register of Webton by which Horizon ceased to be shown as beneficial owner of 40 of Webton's shares and that property included the interest which Horizon had (whether legal or both legal and beneficial) in those shares. 15In my view, the Receivers were therefore entitled to examine the examinees as to those matters, and to examine about the affairs of the Rush G Unit Trust, not as a distinct subject matter, but so far as matters relating to the Rush G Unit Trust were relevant to establishing the facts in respect of the correction of the register and the circumstances by which Horizon, which previously apparently held a beneficial interest in shares in Webton, came to be recorded as not holding that interest and the Rush G Unit Trust came to be recorded as holding that interest instead. The Registrar would need to form a view as to whether any particular question related to that matter. 16On balance, I consider that the Registrar erred in disallowing the particular question as to who set up the Rush G Unit Trust. The answer to that question may well be relevant to an assessment of whether the "correction" of the registrar of Webton so as to cease to show Horizon as the beneficial owner of the Webton shares and instead show the Rush G Unit Trust as the beneficial owner of those shares, was genuinely made. I therefore set aside the Registrar's decision to disallow that particular question. 17I would also not agree with the Registrar's judgment, so far as it expressed the view that the affairs of the Rush G Unit Trust could only be the subject of the examination if it were a connected entity. The Registrar would of course be correct, that the affairs of the Rush G Unit Trust could be the subject of the examination if it were a connected entity. However, as I have noted above, the affairs of the Rush G Unit Trust could also be the subject matter of an examination if a particular question relating to those affairs would cast light on the transactions, dealings and property of Horizon including, relevantly, the manner in which Horizon ceased to hold the beneficial interest in which it had apparently previously been recorded as holding, in the relevant shares in Webton. 18The Receivers have sought declaratory relief in the interlocutory process. It was made clear in submissions that that relief was only sought in respect of questions which had been asked, and not in respect of questions which were proposed to be asked. It appears that only one question was in fact asked and disallowed, although the Registrar's judgment expressed a wider view as to which I have commented above. I do not consider that a declaration would be necessary or appropriate so far as it extended to future questions. 19The Registrar will therefore need to assess whether particular questions have a proper connection with the transactions, dealings and property of Horizon. Some questions relating to the Rush G Unit Trust and Webton could properly be asked on that basis, although it is no doubt the case that other questions relating wholly to the internal dealings of those entities and having no relevance to Horizon could not properly be asked. Costs 20In my view, the Receivers have been substantially successful in this application, so far as I have largely accepted the proposition of relevance for which they contend, although I have not made the particular declarations they have sought. My preliminary view was that the First and Third Examinees should pay the costs of and incidental to the application. However I heard from counsel further as to that matter. 21Mr Martin who appeared for the First and Third Examinees made able submissions urging me to permit the view that each party should pay their own costs. However, it seems to me that the Receivers have succeeded in respect of the substance of the dispute which was the disallowance of a particular question or area of questions. The Receivers have also succeeded in leaving open the ability to cross-examine as to matters involving the Rush G Unit Trust to the extent that those matters are relevant to the transactions, dealings and property of Horizon, which is a matter that might have otherwise been foreclosed by the decision delivered by the Registrar. 22I accept, as Mr Martin rightly points out, that there may be questions that are properly not to be asked having regard to my judgment. However, it seems to me that the Receivers have been largely successful in securing the ability to examine as to the area as to which they seek to examine. Accordingly I order that the First and Third Examinees pay the Receivers' costs on the application.