Onefone Australia Pty Ltd v One.Tel Ltd

Supreme Court of NSW|2007-03-27|Before: Barrett J

CITATION : Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 268 This decision has been amended. Please see the end of the judgment for a list of the amendments.

JURISDICTION : Equity Division Corporations List

DECISION : Interlocutory processes dismissed with costs

LEGISLATION CITED : Australian Securities and Investments Commission Act 2001 (Cth), s.19 Corporations Act 2001 (Cth) Part 5.9, ss.588FC, 588FE, 588FF(1), 588FF(3), 596B, 596C(2), 596F(1)(a)

BP Australia Ltd v Brown (2003) 58 NSWLR 322 Davies v Chicago Boot Co Ltd (2006) 58 ACSR 505 Davies v Chicago Boot Co Ltd [2007] SASC 12 Gordon v Tolcher (2006) 231 ALR 582 Grimwade v Federal Commissioner of Taxation (1949) 78 CLR 199 Hamilton v Oades (1989) 166 CLR 486 McGrath v National Indemnity Co (2004) 182 FLR 309 Meteyard v Love (2005) 65 NSWLR 36 CASES CITED : Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 69 Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 112 Re Excel Finance Corporation Ltd; Worthley v England (1994) 52 FCR 69 Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559 Re Godfrey (as Liquidator of Pobjie Agencies Pty Ltd) [2007] NSWSC 138 Rodgers v Commissioner of Taxation (1998) 88 FCR 61 Scott v Casualife Furniture International Ltd (2005) 195 FLR 170 Sent v Andrews (2002) 6 VR 317 Tolcher v Gordon (2005) 53 ACSR 442 Veremu Pty Ltd v Ezishop.Net Ltd (2003) 47 ACSR 681

Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff Talent2 Works Pty Ltd - Fourth Plaintiff PARTIES : One.Tel Limited - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant Paul Gerard Weston - Special Purpose Liquidator Martin Green and Darren Miller - CPH/PBL Applicants News Limited, John Hartigan, Peter Macourt and Ian Philip - News Limited Applicants

Mr R.D. Glasson - Special Purpose Liquidator COUNSEL : Mr T.F. Bathurst QC/Ms K.C. Morgan - PBL Applicants Mr M.A. Pembroke SC - News Limited Applicants

NOT Lawyers - Special Purpose Liquidator SOLICITORS : Atanaskovic Hartnell - PBL Applicants Allens Arthur Robinson - News Limited Applicants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

5291/03 ONEFONE AUSTRALIA PTY LIMITED v ONE.TEL LIMITED JUDGMENT

1 By interlocutory processes filed on 2 March 2007 and 5 March 2007, five persons apply for orders discharging summons issued under Part 5.9 of the Corporations Act 2001 (Cth) requiring them to attend for examination by the special purpose liquidator (or "SPL") of One.Tel Limited. The applicants under the first interlocutory process are Mr Macourt, Mr Hartigan and Mr Philip. They are officers of News Ltd and I shall refer to them as "the News associates". The applicants under the second interlocutory process are Mr Miller and Mr Green. They are officers of the PBL Group. I shall call them "the PBL associates". 2 Relevant background to the present applications may be gathered from two recent judgments: Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 69 (14 February 2007) and Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 112 (21 February 2007). The present applicants are the applicants whose applications were dismissed by the earlier of these. The reasons that follow should be read in the light of the earlier judgments. 3 In approaching the present applications for discharge of examination summonses, I must be guided by established principles summarised by Buchanan JA (with whom Vincent JA agreed) in a passage in his judgment in Sent v Andrews (2002) 6 VR 317 at p.320 quoted in the second of my earlier judgments: "Orders for the issue of summonses for examinations will be set aside if they are oppressive, unfair or an abuse of the process of the court. Where an examination relates to proposed or current litigation, in general terms the question is 'whether the examination is genuinely for the information of the liquidator to aid him in considering whether there is a cause of action upon which he will proceed; and the Court will be alive to the possibility of oppression where the application is merely to advance the action, whether actual or proposed' [ Re Narlanda Pty Ltd [1983] 1 QdR 269 at 272]. The strength or weakness of the claim of a company in liquidation against a third party concerns the examinable affairs of the company [ Grosvenor Hill (Qld) Pty Ltd v Baker (1994) 48 FCR 301 at 304]. Gathering information may involve testing and assessing the credibility of the witnesses who provide the information [ Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 582 at 585]. The liquidator is not entitled, however, to conduct a dress rehearsal of the cross-examination in an action or to seek to damage the opposing party's case by attacking the credibility of that party's witnesses [ Re Francis; Ex parte Gittins [1892] 1 QB 646 at 648 and other cases cited]." 4 The examinations with which I am presently concerned are proposed for purposes associated with investigation of the viability of litigation that the SPL may initiate with respect to the cancellation of a renounceable rights issue of shares by One.Tel, being an issue which, it appears, was to be underwritten by News and PBL. These matters are obviously part of the "examinable affairs" of One.Tel and the question whether they are the source of rights of action at the suit of One.Tel or a liquidator of One.Tel is therefore part of the proper province of Part 5.9 examinations: Meteyard v Love (2005) 65 NSWLR 36.

5 The purposes for which the examinations are proposed are briefly described in the first of the earlier judgments, where extracts from several other judgments involving the SPL are collected. The circumstances are unusual because the SPL has been appointed for the single and limited purpose described and discussed in the series of judgments to which I have referred, being a purpose confined to such possible litigation. The SPL's functions are separate from those of the liquidators responsible generally for the winding up of One.Tel. I refer to them as "the One.Tel liquidators". 6 In contending that the proposed examinations overstep the limits allowed by the principles referred to by Buchanan JA, the present applicants rely to some extent on grounds that were advanced by them in support of the claims dismissed by the judgment of 14 February 2007. It was submitted by Mr Glasson of counsel on behalf of the SPL that this of itself amounted to an abuse of process. That cannot be so. The judgment of 14 February 2007 dealt with applications by the persons concerned for leave to be heard on the SPL's application for the issue of examination summonses and applications by those same persons for access to the s.596C affidavit sworn in support of the SPL's application for the issue of examination summonses. Those applications by the persons concerned were made and pursued at a time when no examination summonses had been issued. By the judgment of 14 February 2007, all the applications were dismissed, but on the express footing (stated at paragraph [82]) that anyone in due course actually served with any examination summons eventually issued upon the SPL's application might at that time make an application for the discharge of that examination summons. 7 As a consequence of the judgment of 21 February 2007 and upon ex parte application made by the SPL, examination summonses were later issued in respect of a number of persons, including those whose earlier applications were dealt with by the judgment of 14 February 2007 and whose subsequent applications are now before me: see the judgment of 21 February 2007. The present applications are advanced in the very circumstances and the very way contemplated by the judgment of 14 February 2007. 8 The applicants advance several arguments in support of the proposition that the orders for the issue of examination summonses in respect of the applicants are oppressive, unfair or an abuse of process. As I have said, some of these were relied upon in support of earlier applications but need to be dealt with again. 9 The first matter relied upon by the applicants is that two of the persons concerned (notably Mr Miller and Mr Green) have already been questioned in formal settings by way of examination by the One.Tel liquidators and examination under s.19 of the Australian Securities and Investments Commission Act 2001 (Cth). 10 It was submitted on behalf of Mr Miller and Mr Green that the SPL must have obtained from these sources enough information to form a view on what, it is said, is the only matter on which they could be of assistance, namely, the question of the time at which One.Tel became insolvent. That question has been canvassed widely in other contexts and forums and has been the subject of a quantity of investigation that is available to the SPL. As a result, it was submitted, there should be nothing more that Mr Green and Mr Miller can contribute, particularly bearing in mind that their activities were of an advising or assessing nature and they were not decision makers. 11 The response on behalf of the SPL was to point to certain parts of transcripts to demonstrate a sound basis for an apprehension that Mr Green and Mr Miller may well be able to provide more relevant information. 12 In the course of a Part 5.9 examination by the One.Tel liquidators on 25 July 2002, Mr Miller was asked whether there was "anything else that you learnt, after 17 May 2001, of substance which you did not know prior to that time in relation to the financial position of One.Tel". After Mr Miller answered, "Yes", he was asked what he had learned, at which point there was an objection and the question was not pressed. 13 In the course of Part 5.9 examination by the One.Tel liquidators on 30 April 2002, Mr Green was taken to 86 pages of contemporaneous notes prepared by him and covering a five week period. The transcript then records the following exchanges: "Do these notes represent all the work you did in relation to One.Tel? ---- Privilege. No. Has Mr Slattery in asking questions of you about your knowledge of the affairs of One.Tel even scratched the surface about the amount of work you did in coming to the conclusions you formed? ---- Privilege. No." 14 Also in evidence is an extract from cross-examination of Mr Sherman, one of the One.Tel liquidators, in the ASIC v Rich proceedings currently in progress before Austin J. It is clear from this that he accepted and agreed that the Part 5.9 examinations conducted by the One.Tel liquidators had inquired only to a limited extent into "the rights issue, the underwriting [and] the bridge loan". 15 These three pieces of evidence seem to me to represent a sound basis for an inference that neither Mr Miller nor Mr Green regarded his own Part 5.9 examination by the One.Tel liquidators as having elicited the totality of his knowledge of matters in the relevant time frame bearing upon the financial condition of One.Tel; also that the One.Tel liquidators had not set out in those examinations to elicit full information. The submission to the effect that Mr Miller and Mr Green should be regarded as having nothing more to contribute - as well as any idea that there has already been a comprehensive investigation the results of which are available to the SPL - therefore cannot be accepted.

16 Mr Sherman's confirmation that the One.Tel liquidators did not seek to elicit full information about "the rights issue, the underwriting [and] the bridge loan" is, in my view, significant in relation to all the applicants. It shows that the whole subject matter - which, as I have said, forms part of the "examinable affairs" of One.Tel - is one in relation to which a genuine and legitimate need for investigation by the SPL may be considered to exist. 17 I of course have no way of knowing what information the SPL has obtained from ASIC's s.19 examinations, the content of which is confidential and has not been put into evidence. But I do not think that the fact that such examinations have been conducted detracts from the genuine and legitimate need to which I have referred. I am mindful of the fact that ASIC's inquiries would be directed towards matters not necessarily coinciding with those of interest to the SPL, although there would inevitably be some degree of overlap. To the extent that the SPL has in contemplation the initiation of proceedings under s.588FF(1) of the Corporations Act, he is concerned with causes of action and remedies available only to a liquidator. The particular combinations of ingredients are peculiar to s.588FF(1) and the provisions which "feed into" it, even though some of the components may be relevant to matters that could be expected to be of interest to ASIC. 18 The second general submission (which applies to all applicants and has several branches) proceeds upon a particular view about the proceedings the SPL has in contemplation and the assessment of which, he thinks, may be assisted by the examinations. As I have said, a proceeding by way of application under s.588FF(1) is a possibility under consideration. The date of the event or events that would be central to any "transaction" relied upon for the purposes of s.588FF(1) would, it is said, be 29 May 2001, the day on which the One.Tel board decided not to proceed with the rights issue to raise $132 million. That being so, the submission runs, it would be necessary to show that One.Tel was solvent on that date. It follows, according to the submission, that if One.Tel was, at the relevant time, insolvent to the extent of more than $132 million (it being argued in ASIC v Rich that the directors should have recognised insolvency or likely insolvency as early as January 2001), any "transaction" involved in events of and surrounding 29 May 2001 concerning cancellation of the rights issue and any binding underwriting agreement would not have been one that resulted in insolvency. 19 Section 588FF(1) empowers the court to make orders on the application of a company's liquidator if it is satisfied that "a transaction of the company is voidable because of section 588FE". Section 588FE labels "voidable" transactions of various kinds. Among them are "insolvent transactions" that have certain characteristics. The expression "insolvent transaction" takes its meaning from s.588FC: "A transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and: (a) any of the following happens at a time when the company is insolvent: (i) the transaction is entered into; or (ii) an act is done, or an omission is made, for the purpose of giving effect to the transaction; or (b) the company becomes insolvent because of, or because of matters including: (i) entering into the transaction; or (ii) a person doing an act, or making an omission, for the purpose of giving effect to the transaction."

20 The aspect of the applicants' submissions referred to at paragraph [18] above concentrates on s.588FC(b) and cases where a company becomes insolvent because of entry into the transaction. If the company is already insolvent when the transaction is entered into, that transaction cannot be an "insolvent transaction" under s.588FC(b). It follows, according to the submissions, that if One.Tel was, in January 2001 or thereabouts, insolvent to the extent of more than $132 million, any transaction it entered into in May 2001 with respect to cancellation of the rights issue and underwriting cannot be within s.588FC(b). The applicants point, in this respect, to minutes of a meeting of the board of One.Tel on 29 May 2001 at which Mr Long of Ernst & Young expressed an opinion that the $132 million proposed to be raised by the rights issue would not be sufficient to enable the company to meet its debts as they became due. 21 Mr Glasson pointed out on behalf of the SPL that s.588FC is also concerned with transactions entered into at a time when the company is already insolvent. These are referred to in s.588FC(a). It is therefore possible for any transaction of May 2001 related to cancellation of the rights issue and underwriting to be an "insolvent transaction" even if One.Tel was already insolvent. 22 Mr Glasson also referred to the possible availability of causes of action other than those made available by s.588FF(1) - such as for breach of directors' duties and for failure to advise or faulty advice - that could be available even if One.Tel was insolvent to an extent greater than $132 million. In addition, Mr Glasson pointed out that there is, in theory, no reason why an insolvent company cannot issue a prospectus so that, even if insolvency had already occurred at the time of cancellation of the rights issue, there may still have been loss through the relinquishment of any binding underwriting commitment. Insolvency does not frustrate a share subscription agreement: Veremu Pty Ltd v Ezishop.Net Ltd (2003) 47 ACSR 681. 23 Mr Bathurst QC, on behalf of the PBL associates, and Mr Pembroke SC, on behalf of the News associates, levelled various criticisms at these possibilities. In particular, they said that it is quite unrealistic to think that an insolvent company would issue a prospectus and proceed with a rights issue. Such a possibility means that the company would have to trade while insolvent (the assumption here is that a company cannot issue a prospectus unless it is trading). In addition, it is pointed out that the rights issue was to be a renounceable rights issue, with the rights being traded on the stock market of the Australian Stock Exchange. That, it is said, is something that an insolvent company could not realistically have achieved, as a matter of real world practicality (the assumption here is that a system of transfer of rights is impossible except through a stock market). 24 The applicants further submit that, apart altogether from the insolvency question and the time at which insolvency occurred, any s.588FF(1) action brought by the SPL must fail because thee was no "transaction with" anyone. They say, quite simply, that the cancellation of the rights issue could not be or entail a "transaction with" another person because it was no more than a unilateral determination or decision. The High Court's decision in Grimwade v Federal Commissioner of Taxation (1949) 78 CLR 199 was cited in that connection. 25 Mr Glasson submitted that Grimwade's case is authority only for the proposition that the mere casting of a vote is not a "transaction", while Gorton v Federal Commissioner of Taxation (1965) 113 CLR 604 indicates that the casting of a vote in a context of some agreement, arrangement or understanding of some reciprocal kind may be a "transaction". Steps which led to release of a binding underwriting commitment could be a "transaction with" the person who had given the commitment. As to the possible existence of a binding commitment in this respect, there is a statement in minutes of a One.Tel board meeting on 17 May 2001 that representatives of News and PBL had expressed themselves "happy for an announcement [of the proposed rights issue] to be made [by One.Tel] when an underwriting agreement had not been signed". The context suggests that Foreign Investment Review Board approval was the only envisaged condition.

26 The SPL also points to notes apparently taken by Mr Long of Ernst & Young at a meeting on 27 May 2001 at the CPH offices (CPH being an associate of PBL) recording the following: " -- Extract from underwriting. -- Independent directors to come to conclusion re solvency. -- Better for the directors to conclude that underwriting is not enough to get past the cash hurdle." 27 This note was, it is alleged, made at a time before Ernst & Young was retained by One.Tel. As has been noted, the One.Tel board meeting at which it was decided not to proceed with the rights issue took place two days later, on 29 May 2001. The SPL refers to a possibility, at the least, that this indicates that there existed at 27 May 2001 a plan to "extract" from the underwriting through cooperation with the independent directors.

28 Mr Glasson submitted, in relation to the general issue of "transaction", the timing of insolvency and the parameters of the different elements of s.588FF(1) and associated provisions, that there is sufficient material to warrant further investigation by the SPL, that being all that is sought by means of the examination summonses. Mr Glasson also submitted that it is not the court's function, upon an application such as this, to come to firm views about the availability or unavailability of causes of action under investigation by a liquidator. He quoted, in that connection, the following observation of White J in the recent case of Re Godfrey (as Liquidator of Pobjie Agencies Pty Ltd) [2007] NSWSC 138 at [76]: "I reject this submission. It is no part of the Court's task on an application for the issue of an examination summons to discern whether or not the company has a good cause of action against the examinees or a person with whom the examinees are connected. The investigation of facts to ascertain whether or not a cause of action might exist either against such persons, or against other persons, (such as officers of the company), is a proper purpose of an examination. Such an examination is not to be pre-empted by the examinees adducing evidence directed towards demonstrating that they, or persons connected with them, could have no liability to the company." 29 It is, in my view, unproductive in the present context to engage in detailed speculative analysis of the possible strengths and weaknesses of proceedings that the SPL may decide to initiate. A full assessment could only be made in the light of all the evidence. And it is evidence that the SPL is seeking. It is clear that the investigation the SPL wishes to progress by means of the particular examinations centres upon particular litigation possibilities and that his purpose in seeking to conduct examinations is to obtain further information that will better equip him to make a decision whether to proceed with one or more of the proceedings under consideration. That is an entirely legitimate purpose so far as resort to the Part 5.9 facility is concerned. In the whole of the context and even allowing for possibilities to which counsel for the applicants point, it cannot be regarded as at all incompatible with the purposes for which that facility exists to seek to use it to obtain further information from the persons concerned. 30 The third area of controversy raised by the applicants is based on the proposition that any examinations should await the outcome in ASIC v Rich. The thesis is that the judgment in that case may provide information to the SPL that makes it unnecessary for him to conduct the foreshadowed examinations or, at least, allows him to reduce their scope. The concern, from the SPL's viewpoint, is limitation periods, and that concern is not wholly resolved by the expressed willingness of potential defendants to cooperate in obtaining modification of (or in not relying on) time bars otherwise applicable. The judgment of 14 February 2007 concluded, in essence, that such cooperation could safely be relied upon by the SPL in relation to the potential causes of action other than any arising under s.588FF(1) of the Corporations Act. 31 Upon the present applications, Mr Bathurst renewed his submission that the SPL could safely rely on cooperation and consent in relation to the time limit imposed, for s.588FF(1) purposes, by s.588FF(3). An order under s.588FF(3)(b) has already been made so that the period now applicable for s.588FF(1) purposes is the period of six years from the relation-back day rather than the period of three years from the relation-back day, at least as regards any proceedings against News and PBL/CPH and their respective subsidiaries. Mr Bathurst continues to argue that that substituted period fixed by an order of the court made under s.588FF(3)(b) on an application made within three years after the relation-back day might itself be extended by a subsequent order of the court made under the rules of court allowing variation of orders. This is the matter canvassed at paragraphs [51] to [60] of the judgment of 14 February 2007. 32 In advancing this submission, Mr Bathurst took me to high authority analysing the distinction between final orders and interlocutory orders. He made extensive reference to the High Court's recent decision in Gordon v Tolcher (2006) 231 ALR 582 and the Court of Appeal's decision in BP Australia Ltd v Brown (2003) 58 NSWLR 322. He pointed out that the question mark placed over the decision of the Full Federal Court in Rodgers v Commissioner of Taxation (1998) 88 FCR 61 by observations of Debelle J in Davies v Chicago Boot Co Ltd (2006) 58 ACSR 505 has been removed by the Full Court of the Supreme Court of South Australia which has now allowed an appeal from Debelle J: see Davies v Chicago Boot Co Ltd [2007] SASC 12. 33 I do not need to analyse these matters further. There are two reasons for this. First, I am not required, in the present context (nor was I required in the judgment of 14 February 2007) to come to any concluded view on the question whether an order made by the court extending time under s.588FF(3)(b) may effectively be varied by a subsequent order of the court. I am required to do no more than decide whether the proposition that a varying order may have the effect for which Mr Bathurst contends is so free from doubt that it would be unreasonable, irrational or oppressive for a liquidator offered consent to the making of such a varying order not to accept the offer, rather than pressing on with investigations. A decision on that matter does not depend on the ultimate answer to the question about the effectiveness of a varying order. Rather, the court has to inquire into the reasonableness of the view that a liquidator could not prudently proceed on the basis that the answer for which Mr Bathurst contends is so obviously correct that acceptance of it presents no prospect of prejudice to the administration. 34 This leads to the second point which goes to the particular terms of s.588FF(3): "An application under subsection (1) may only be made: (a) within 3 years after the relation-back day; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator within those 3 years." 35 As a matter of plain words and leaving aside the various judicial statements to which I was taken, I am not at all satisfied that, when attention is paid to the terms of the legislation, the answer for which Mr Bathurst contends is so obviously and unquestionably correct the SPL may embrace it without any prospect of prejudice to the administration. This may be illustrated by a hypothetical example. Assume the following sequence of events: · 1 January 2001 - Relation-back day. · 30 June 2003 - Liquidator files in Supreme Court application for an order specifying the period ending on 31 December 2006 as the period within which an application for an order under s.588FF(1) may be made against X. · 30 July 2003 - Supreme Court makes order as sought by the application filed on 30 June 2003. · 30 October 2006 - Liquidator files in Supreme Court application for an order varying the order of 30 July 2003 by substituting "31 December 2007" for "31 December 2006". · 30 November 2006 - Supreme Court makes order as sought by the application filed on 30 October 2006. · 1 August 2007 - Initiating process filed by liquidator in District Court of New South Wales seeking order under s.588FF(1) against X. 36 The question posed by s.588(3) in these assumed circumstances is whether the application filed by the liquidator in the District Court on 1 August 2007 is an application made within a period that was ordered by the Supreme Court on an application made within three years after the relation-back day (for reasons explored in McGrath v National Indemnity Co (2004) 182 FLR 309 and apparently accepted by the Court of Appeal in Tolcher v Gordon (2005) 53 ACSR 442, I am of the opinion that it is the application for an order extending time, not the order itself, that s.588FF(3)(b) requires be made within three years after the relation-back day). The answer is that the only period that was ordered by the Supreme Court upon an application made within three years after the relation-back day is the period ending on 31 December 2006 specified in the order made on 30 July 2003 upon the application made on 30 June 2003. A period ending on 31 December 2007 was specified in a varying order made on 30 November 2006 upon the application of 30 October 2006, but both the order of 30 November 2006 and the application of 30 October 2006 were made more than three years after the relation-back day. 37 Even assuming that the original s.588FF(3)(b) order extending time was, as is suggested by Scott v Casualife Furniture International Ltd (2005) 195 FLR 170, an order of the kind that the rules of court allow to be varied by a later order, it does not seem to me possible that any varying order would (or could be made to) have such force and operation as to change the date of the making of the order it varied. Even less could it change the date of the application for the order it varied. A varying order may, by the terms in which it is made, have effect from the date on which the order it varies was made: see Re Future Life Enterprises Pty Ltd (1994) 33 NSWLR 559 at p.563. But that does not affect the time at which any order was made or the time at which any application for an order was made, the latter being, for reasons stated, the important event for the purposes of s.588FF(3)(b). Going back to the hypothetical example, I consider it obvious that the varying order made on 30 November 2006 could not, by any form of retrospective language, turn the application in fact made on 30 October 2006 into an application made on 30 June 2003. 38 This analysis sufficiently shows, in my view, that the court should not regard the SPL as acting in some unreasonable, irrational or oppressive way by proceeding on the basis that any s.588FF(1) proceedings he eventually decides to institute must be commenced by application made before the end of the extended period already fixed by the existing order made under s.588FF(3)(b) within three years after the relation-back day, rather than relying on a view or assumption that, with the protection of a varying order made after the end of the three years (with the proffered consent of relevant persons), he may safely postpone the initiation of any such proceedings to a point beyond the end of the extended period fixed by the existing order.

39 Having considered the submissions advanced by the applicants, I am not by any means satisfied that the SPL is embarking on examinations of them for some improper purpose. Nor is there anything to warrant a finding that it would be unfair or oppressive for the SPL to proceed with the examinations. The applicants point to what they regard as weaknesses - even fatal flaws - in any case the SPL would seek to mount. It may be that, even accepting what was said by White J in the Pobjie Agencies case (above), if the court could see with crystal clarity that, whatever further evidence might be gathered, the case that a liquidator was considering pursuing was manifestly hopeless and devoid of all possible merit, it would consider it appropriate to regard an examination as an abuse of process - at least if there were no other conceivable reason why the person concerned should be questioned. That is not the position here. None of the suggested weaknesses is so clear and pervasive as to make all potentially available causes of action manifestly and irremediably untenable. Rather, the situation is the usual one in which a liquidator is considering several possible causes of action - all of them related to the circumstances concerning the rights issue which are the allocated province of the SPL - and desires to obtain further information to enable him to come to a conclusion about the viability of the causes of action. That is a perfectly legitimate basis on which to undertake examinations.

40 The will be no order discharging any of the examination summonses.

41 I have not to this point referred to the fact that the applicants also apply for orders allowing access to the affidavit under s.596C supporting the application for the issue of the examination summonses. In the case of the PBL associates, the order sought is an order granting access to the legal advisers, such access to be upon the legal advisers' undertaking to the court not to disclose the affidavit's content. The News associates simply seek access. In accordance with s.596C(2), the affidavit is not available for inspection except so far as the court orders.

42 The guiding principle in relation to this aspect is that "an applicant for disclosure of the affidavit will generally be able to obtain access to the affidavit if he or she can demonstrate an arguable case that the issue of the summons exceeded the power of the court under s.596B and that access to the affidavit is likely to assist in determining the correctness of the challenge": Meteyard v Love (above) at pp.72-73 per Basten JA. But even then, access may, as a discretionary matter, be denied if it "could afford an examinee information which could permit the examination process to be frustrated": Re Excel Finance Corporation Ltd; Worthley v England (1994) 52 FCR 69 at p.93 per Gummow, Hill and Cooper JJ.

43 For reasons already stated, I am not satisfied that the applicants have shown any arguable case that the issue of the examination summonses exceeded the power of the court. The conclusion that the applicants have not made out any case to have the summonses be set aside, coupled with the fact that access to the affidavit would inevitably provide insights into a developing litigation strategy which ought to be afforded confidentiality - leads to the conclusion that access to the affidavit should be denied. I would add, in relation to the PBL associates, that the utility of granting access to the legal advisers on their undertaking to the court not to disclose the affidavit's content (so that they could not disclose it so as to assist their clients) is, in any event, somewhat elusive.

44 Finally (and in the event that the examination summonses are not discharged), the applicants claim an order that the matters to be inquired into at the examinations of the applicants be restricted to matters concerning the cancellation of the renounceable rights issue by the board of One.Tel on 29 May 2001. This application is presumably advanced by reference to s.596F(1)(a) which empowers the court to give directions about the matters to be inquired into at an examination.

45 On this aspect, there is no evidence that the SPL has it in mind to overstep the limits imposed by his own limited powers as conferred by the court or the principles as to the proper scope of examinations. There is accordingly no basis for making the order sought. At the same time, however, the SPL will no doubt bear in mind the power of the court to control an examination as it proceeds and to ensure that it remains within proper boundaries. I refer in that connection to what was said by Mason CJ in Hamilton v Oades (1989) 166 CLR 486 at p.498: "The court retains its power to give directions and to restrain questions in cases where the examination is being conducted for an improper purpose or constitutes an abuse of process: s 541(5). Thus if a liquidator were to conduct an examination directed to compel the examinee to disclose defences or to give pre-trial discovery, or to establish guilt, this examination may be restrained as an abuse of process: Hugh J Roberts ((1970) 91 WN (NSW) at 541) ; Huston v Costigan ((1982) 45 ALR 559 at 563) ; Re Gordon ((1988) 18 FCR 366) ."

46 The applicants have not made good their claims. Each interlocutory process will therefore be dismissed with costs. **********

27/03/2007 - Incorrect name of SPL - Paragraph(s) Page 2 of cover sheet

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